The NYT Freakonomics blog notes that the Fair Trade movement does not exist independently of the laws of economics:
But the problem with Fair Trade coffee is that as the program scales up, the alternative market ethics it wants to sustain collapse. Inevitably, the Fair Trade market becomes subject to the same laws that drive the conventional commodities market. When the price of coffee drops, the appeal of Fair Trade’s price support lures growers into the cooperatives that sell coffee under the Fair Trade label. As poor growers rush into Fair Trade agreements, the supply of Fair Trade coffee rises. Protected by the price floor, the Fair Trade coffee remains inflated despite flagging demand. What Fair Trade importers thus end up doing with the excess Fair Trade coffee is dumping it—upwards of 75 percent of it!—on the conventional market.
This is a huge problem for Fair Trade. Essentially, to be successful, it must, as I have stated in the past, “argue for a complete standardization of its price-fixing methods.”
