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At the national level we focus on evaluating the effect of Chinas WTO accession on macroeconomic indicators as well as on agricultural trade including imports and exports As expected and similar to many other studies Chinas WTO accession by reducing or eliminating import tariffs would benefit the economy at the aggregate level The gain comes from a more efficient allocation of current factor endowments which allows GDP and the level of consumers aggregate consumption to rise While fully liberalizing agricultural trade only scenario 2 raises GDP by 023 percent liberalizing both agricultural and non-agricultural trade scenario 3 allows the gain in GDP to almost triple to 08 percent The result is comparable with those from the other studies eg Chinas GDP rises by one percent in USITC 1999 and 14 - 2 percent in Lejour 2000 in which the long-run cumulative effect of tariff reduction is taken into account With more imports of foreign goods at lower prices the domestic price level declines However the decline mainly happens in agricultural pric es when agricultural trade is liberalized Once both agricultural and nonagricultural trade are fully liberalized the decline in agricultural prices becomes much smaller and is comparable with the change in nonagricultural prices and the consumer price index as well as the depreciation of the real exchange rate Table 4 This comes from the higher demand for agricultural products due to higher income level after full liberalization If only agricultural trade is liberalized rural income declines in both nominal and real terms due to the decline in agricultural income including returns to labor employed in agriculture as well as to land and agricultural capital In contrast urban income rises in the same scenario If both agricultural and non-agricultural trade are liberalized agricultural and rural incomes increase both in real and nominal terms even though the increase is still smaller than the gain in urban income Table 4 These results warn us that the income gap
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