Country of Origin and Thai Consumer Valuation of Fruits and Vegetables Under Free Trade Agreements

Abstract

Trade barriers provided Thai fruit and vegetable producers protection against imported fruits and vegetables until the advent of Free Trade Agreements (FTAs). Whilst FTA benefits in terms of lowering prices to consumers and opening opportunities for local producers to penetrate foreign markets are often cited, FTAs allow imported goods and services to compete freely with domestic production. This study adopts the nth price auction method in order to elicit the Willingness to Pay (WTP) of Thai consumers for fruits and vegetables which have different Countries of Origin (COOs). About 60 subjects particulates in the experiment. Fruits and vegetables used in this experiment included strawberries, kiwifruits and carrots from China, the United States, New Zealand, Japan and Thailand. Three of these countries currently have FTAs with Thailand, except for the United States where the process is still under negotiation. FTAs eliminate trade barriers and as a result intensify price competition. The results show that Thai consumers gave COO valuations with the highest average WTP to the United States, followed by Japan, New Zealand, China and Thailand, respectively. WTPs of fruits and vegetables grown in Thailand and imported from China are statistically not different which implies that Thai fruits and vegetables are overpriced and cannot compete with import from China. On the other hand, the WTPs of fruits and vegetables imported from the United States, New Zealand and Japan are within the same range.