Study On Trade Liberalization And Agricultural Structure

With China's accession to WTO,trade openness has a great impact on the development of agriculture.The total amount of China's agricultural trade has grown rapidly which has also influenced China's agricultural structure.According to the classical trade theories,after China's trade liberalization,the proportion of labor-intensive industries in the agricultural structure will increase,while the proportion of land-intensive industries will decrease so that we can achieve the efficiency of allocation of resources and improve the social welfare and also optimize China's agricultural structure.However,such kind of agricultural structure is faced with a problem,that is,compared to the labor-intensive industries,land-intensive industries involves most of the rural people and their jobs.Complete trade liberalization will sharply decrease the proportion of land-intensive industries in the agricultural structure which inevitably will not only hit the industries but also damage the welfare of these rural people and leads to their unemployment.What is worse,it might threat the basic living of these people.The reason why the situation in reality is different to the classical trade theories is that there is an assumptions implied in the theories which is the sufficient liquidity of resources.For the agricultural department,the resources have relatively low liquidity.So when facing with trade shocks,it's difficult for these resources to be transferred to other department immediately and barrier-freely.This results in that the resources can not be re-configuration effectively and caused the so-called adjustment costs.The agricultural structure can't be optimized as what the classical trade theories say.So based on this,this paper will study the effect of trade liberalization on China's agricultural structure from a perspective of agricultural trade-induced adjustment costs.It will provide some proposal for our government making policies on how to guide the agricultural structure to develop in an optimizing way so as to promote the development of agriculture and increase farmers' income.The paper is divided into six parts.The first part presents the background and significance of this paper and so on.The second part reviews the theoretical foundation of industrial structure analysis and adjustment costs and related literature.The third part analyzes the changes inagricultural trade and agricultural structure and finds that China's agricultural industry structure still exist some problems.The fourth part describes the generation mechanism of trade-induced adjustment costs and its measuring method.Then the paper test the measuring method of trade-induced adjustment costs known as {" the Smooth Adjustment Hypothesis" using the relevant data of China's agricultural department in 1992-2012 years.The result shows that "the Smooth Adjustment Hypothesis" is applicable in China's agricultural department.The fifth part explains the impact mechanism of trade-induced adjustment costs to industrial structure.Then,based on the data availability,the paper use dynamic panel model to analysis the impact of trade liberalization to food processing industry structure from the perspective of the trade-induced adjustment costs.The empirical result shows that inconsistent with the classical trade theories,agricultural trade liberalization will not improve and optimize the agricultural structure.Trade-induced adjustment costs,to a certain extent,will have a negative impact on optimizing the agricultural structure.The last part of this paper presents policy recommendations.