Author
Caswell, Julie A.
A two-country, comparative static partial equilibrium model is used to simulate the ex ante market and welfare outcomes of U.S. country-of-origin labeling for the U.S.-Mexico fresh tomato trade. In all scenarios where consumers show a relative preference for U.S. tomatoes, Mexican tomato exports decline and U.S. production increases. Mexican trade losses using low- to mid-range consumer preference assumptions are 14% to 32% of the value of Mexican tomato exports to the United States and 1% to 3% of the total value of agricultural produce exports, partially negating the market access gains of NAFTA. Consumer effects are small and sometimes negative. Producer impact is the big effect, with transfer from Mexican to U.S. tomato producers.
Some consumers derive utility from using products produced with specific processes, such as environmentally friendly practices. Means of verifying these credence attributes, such as certification, are necessary for the market to function effectively. A substitute or complementary solution may exist when consumers perceive a relationship between a process attribute and other verifiable product attributes. We present a model where the level of search and experience attributes influences the likelihood of production of eco-friendly products. Our results suggest that the market success of eco-friendly food products requires a mix of environmental and other verifiable attributes that together signal credibility.