This agreement had regulated how much coffee each country was allowed to export, stabilising prices and keeping them reasonably high. It was partly a product of the cold war: the US was frightened that Latin American coffee producers would turn to communism if they were too immiserated by low, volatile coffee prices. The International Coffee Agreement collapsed in 1989, and the result was a horrendous drop in world coffee prices which threw many coffee farmers into desperate poverty.
This history is why Fairtrade put so much focus on prices – it was, basically, stepping into the void left by the collapse in this agreement. It has a fixed premium that must be paid on top of the market price, and it has a minimum price that must be paid when the market price falls below it, as a safety net.
To complement this, regulations were added. To get certified, a producer must show that it is meeting certain social and environmental standards. It can then attempt to sell its produce at the Fairtrade price, if it can find a buyer.
That last point is a bit of a snag, however, and a common cause of confusion. Being certified Fairtrade does not mean that a producer is selling its produce as Fairtrade. Certified tea producers on average only manage to sell around 7% of their tea on Fairtrade terms. The average across all products is about 40% for small farmer organisations, and 20% for estates.
It's basically an extra fifth on top
The Fairtrade premiums are currently set at US $ 0.50/kg tea, and $0.20/lb coffee. The market prices, meanwhile, are at around $2.50 /kg tea, and $1.10/ lb coffee. In other words, both premiums provide about an extra fifth on top of the market price.
The coffee price fluctuates more wildly, and has much more frequently gone below the Fairtrade minimum, which is between $1 and $1.40/lb depending on the type.