- Perfect competition on Wikipedia: Price floor. Perfectly competitive industries do not have any price control, and all the farms bring other farms prices down, and in the long run, everybody loses, and the standard of living will decrease. Fair trade acts as a price floor, making sure the prices do not get too low.
Some fair trade farms have been found to have worse conditions than other ones. This is because although they get paid more per pound of the item, they sell less at some farms.
- Fair Trade acts as subsidy, distorting markets. "Voting with your trolley." The Economist. December 7th, 2006: "Who could object to [Fair Trade]. Economists, for a start. The standard economic argument against Fairtrade goes like this: the low price of commodities such as coffee is due to overproduction, and ought to be a signal to producers to switch to growing other crops. Paying a guaranteed Fairtrade premium—in effect, a subsidy—both prevents this signal from getting through and, by raising the average price paid for coffee, encourages more producers to enter the market. This then drives down the price of non-Fairtrade coffee even further, making non-Fairtrade farmers poorer. Fairtrade does not address the basic problem, argues Tim Harford, author of “The Undercover Economist” (2005), which is that too much coffee is being produced in the first place. Instead, it could even encourage more production."
- Fair Trade certification often wrongly offered to small farmers. "Voting with your trolley." The Economist. December 7th, 2006: "Another objection to Fairtrade is that certification is predicated on political assumptions about the best way to organise labour. In particular, for some commodities (including coffee) certification is available only to co-operatives of small producers, who are deemed to be most likely to give workers a fair deal when deciding how to spend the Fairtrade premium. Coffee plantations or large family firms cannot be certified. Mr Bretman says the rules vary from commodity to commodity, but are intended to ensure that the Fairtrade system helps those most in need. Yet limiting certification to co-ops means 'missing out on helping the vast majority of farm workers, who work on plantations,' says Mr Wille of the Rainforest Alliance, which certifies producers of all kinds."