Evaluating the Impacts of Information and Communication Technology (ICT) on Trade in Fruit and Vegetables within the APEC Countries

Abstract

The global food marketing network is being constantly reshaped, providing opportunities and challenges to the use of information and communication technology (ICT) to develop international trade in food products. ICT is likely to be especially important for food products such as fresh fruit and vegetables that are differentiated and sensitive to timeliness in supply, possess varied quality dimensions, and involve considerable supply accumulation and assortment. Digital ICT (Internet and mobile phones), in particular, is expected to facilitate international trade and encourage efficiency in the fruit and vegetables marketing system in two main ways. First, it reduces communication and search costs through cheaper and more effective media. Second, it improves market information and corrects information externalities along the supply chain, by promoting greater price transparency and enabling consumer preferences and tastes to be more precisely met. We employed a gravity model of international trade to test the hypothesis that ICT positively affects bilateral international trade in fruit and vegetables between member Asia-Pacific Economic Cooperation (APEC) economies in the period from 1997 to 2006. Explanatory variables include the usage of the Internet, mobile telephones and fixed telephone lines, and a broad range of factors that might determine the value of bilateral trade such as income per capita, population, distance between trading partners and common language. A Poisson pseudo-maximum likelihood model was estimated in order to handle zero trade observations and reduce biases caused by heteroskedasticity. Empirical results were not quite as expected, with relatively minor impact of digital ICT. They suggest that using digital ICT has significant positive effects on trade in fruit and vegetables between APEC countries only for the Internet in exporting countries. A stronger positive impact was discerned for the traditional form of ICT, fixed telephone lines in exporting importing countries. Nevertheless, fostering the development of digital ICT infrastructure and its diffusion should make exporters in APEC countries more competitive in the fruit and vegetables supply chain through the Internet effect, and boost their trade values in these products.