Fair trades expansion has drawn criticism from across the political spectrum. Economic arguments against fair trade address price distortions and market inefficiencies caused by price floors. Economic counter arguments address the inequality of the market power of the buyer and seller and that comparisons to efficiency in a competitive market is inappropriate. The conditions in rural developing countries is further from the assumptions of perfect competition when one considers asymmetry of information, limited access of credit, and inability to switch production techniques and outputs in response to market signals. Similarly they argue that economists frequently ignore product differentiation and quality differences.
Economic arguments also include the distortion caused by the insider-outsider markets. The argument claims that aim to help marginalized producers impacts other producers (including marginalized producers of non fair trade commodities). This is in effect the argument that favorable treatment of one segment of the market leads to bias against the second segment as in wage discrimination. Counter arguments incorporate the join gain to all producers gained from access of better information, greater access to credit and markets, and the increased ability to learn production techniques.
At the other end of the political spectrum is the argument that fair trade is a movement within the market system and fails to address the equity and fairness of the resulting market. This argument addresses the retail pricing and the share of the difference between fair trade and non-fair trade commodities returned to the marginalized producers as well aspects of trade agreements. This is effectively the counter to the economic concerns for efficiency in that equity is the concern.
In 2006, a European Parliament Resolution recognized the benefits of fair trade and suggested the development of an EU policy on fair trade, called for greater support of fair trade, and called for defining the criteria for fair trade to protect it from abuse. Economic arguments can be made that import restrictions based on social criteria similar to fair trade standards would be appropriate.
The fair trade market is special in the social, relation-related product attributes play a dominant role. The steady growth of fair trade markets shows that there is a stable market for this unique product. What is not apparent is whether this is a result of the push of the price floor and supporting attributes of fair trade, the pull of the marketing 4 P’s of product, price, place, and promotion, or the movement towards efficiency? This paper presents a different perspective of that found in the literature in that it addresses the economic arguments through the lens of the marketer and identifies parallels with the transition of individual farmers to cooperatives in the