Trade Openness, Price Transmission And Farmers' Welfare

China is one of the countries with the largest rural-urban income gap in the world. Its ratio of urban income to rural income has been up to 3 times since 2000 and urban-rural dual structure displays gradually. After China's accession by WTO in 2001, concerns are escalated that trade openness will have negative impact on the domestic agricultural prices through the conducting mechanism by international prices, which may hinder the improvement of farmers'welfare. That is the reason why some researchers insisted on protecting our agricultural market from trade openness.Food sufficiency is meaningful to China, as it is a large agricultural country, characterized with large population. And the supply of agricultural products can't mainly rely on the foreign market. So it is rational and indispensable to protect the agricultural market. But the question whether the trade openness will threaten farmers'welfare by price conducting mechanism deserves further study.Through compared the tendency of the domestic with international prices of main agricultural products, the price conducting mechanism between agricultural market's openness and domestic prices of main agricultural products exists indeed, as most of our agricultural products don't have the comparative advantages in international market, whose prices will be lowered after market openness. Judged just by the angle of agricultural market openness and the farmer's absolute income, trade openness will decrease the farmers'agricultural income, and have negative effect on the enhancement of farmers' income in China.But farmers are not only the producer and consumer of agricultural products, also the consumer of industrial products. Thus, besides the prices of agricultural products, the industrial products'prices are also the factors, which decide the farmers'real purchasing power and welfare. While the agricultural products' prices determine more the farmers'real income, both of the prices decide the real purchasing power under the income level, that is real income and welfare level. Therefore, the factor which really determines the farmer real purchasing power and income is the relative price of agricultural and industrial products, which can also be explained as agricultural-Industrial trade terms. Besides that, the trade openness we confront with is general openness. Our market access will increase gradually, while we benefit from the openness by exerting our comparative advantage. Although most of the countries are inclined to open the sectors with comparative advantage, and protect that of comparative disadvantage, the eventual result is every party will accept overall openness equally after multilateral game. In that case, the influence of price conducting to both agricultural and industrial products should be involvedThus, when the impact of trade openness and price conducting on farmers' income and welfare from the angle of price are concerned, what really needs to be studied is the mechanism, by which the international price will impact on the domestic agricultural-Industrial trade terms, its tendency and the impact on the farmers' welfare.The point that actual impacts of trade openness and price conducting on farmers' welfare can be discussed from the angle of relative price needs to be proved through logical deduction. First, the thesis studies the infection of international price on main agricultural products in China, by analyzing the domestic and international prices of the main agricultural products. The result indicates, international price conducting influence China's domestic price indeed. And Judged by the market openness of agricultural products and farmers'real income, market openness will decrease the farmers'agricultural income and have disadvantage to the improvement of our farmers' income.Secondly, considered from the angle of relative price, the price conducting brought by overall openness will affect the prices of agricultural and industrial products. And the direction and dimension of the impact of trade openness to relative price depend on those of the price conducting to domestic agricultural and industrial products individually. The impact of price conducting by trade openness on domestic agricultural products and industrial products are qualitatively analyzed and compared in the paper, by utilizing the price of domestic and international agricultural and industrial products. The conclusion is that the impact of price conducting on industrial products is larger than that on agricultural products. As both of domestic industrial and agricultural products don't have comparative advantage in international market, price conducting mechanism makes the price of industrial products lower, compared to agricultural products. Thirdly, the empirical study on the influence of trade openness to the relative price of agricultural and industrial products is conducted in the dissertation, using the historical datum during 1978 to 2007, which disclose the direction and dimension of the impact of overall openness on relative price of agricultural price by price conducting. It shows overall openness contributes to push the agricultural-Industrial trade terms to the facet more beneficial to agricultural products. Actually, more intensive market penetration, quicker technical progress and price conducting mechanism make the pull-down effect of industrial sector's openness to domestic industrial products'prices is much larger that that of agricultural sectors'openness to agricultural products'prices. Therefore, overall trade openness will increase the domestic agricultural products'price and decrease the industrial products' products.Finally, as the last link of the study, what's the main impact of the changes of relative prices on farmers'income and its impact mechanism are another questions to be discussed. The changes of rural residents'consumer structure are used to stand for that of farmers' welfare. The paper analyses the effect of relative prices'change on rural residents' consumer structure empirically by the datum from 1978-2007, and illustrates its mechanism using economic theory. It proves that the decrease of the industrial relative price will increase the purchasing power of farmers'real income and is beneficial to improve the consumer structure of rural residents. They will consume more industrial products, which decreases the share of agricultural products and reflects the improvement of China's rural residents' living standard.