Abstract
LeClair [LeClair, M. S. (2002). Fighting the tide: alternative trade organizations in the era of global free trade. World Development , 30 (6), 949–958] concludes that in theory Fair Trade is a second-best alternative to aid, may impose losses on non-Fair Trade producers and prolongs dependence on unsustainable modes of production. This paper shows how these conclusions depend upon a particular definition of subsidy and upon the assumptions of full employment and that Fair Trade goods face price-inelastic demand. An adverse impact on non-Fair Trade producers is possible but not intrinsic, and the claim of economic inefficiency cannot be sustained within a more general analysis.
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