In recent years, a number of researchers have documented the impact of China's trade and domestic market liberalization-both pos-itive and negative-on the performance of the rural economy (Huang and Chen; Huang, Rozelle, and Chang). Most of the work, how-ever, has focused on the agricultural out-put markets. Beyond the impacts that have occurred through output markets, liberaliz-ing trade and domestic markets also can affect producers through the effects on agricultural inputs. To compete effectively with pro-ducers from other countries and benefit from trade liberalization, farmers in China need to have access to high-quality, modern inputs. The effects of input market and trade liberaliza-tion also can be significant; fertilizer accounts for around 40% of the cash outlays of farmers in China and chemical fertilizers are China's largest imported input in value terms. Despite the potential benefits to farmers, few researchers have attempted to document either trade or domestic market reforms for inputs in China. Although national leaders announced efforts to relax restrictions on inputs during the early reform years, the at-tention given to the reform of markets for fertilizers, pesticides, and seeds lagged behind the reforms affecting output commodities (Stone, 1988; Crook). The challenges faced by reformers in the case of inputs also have been greater than for farm output. Prior to the reforms, agricultural inputs almost exclusively were manufactured by state-owned enterprises and distributed through rigidly structured state-run sales networks. Given their starting point and that leaders have paid less attention to the reform of input markets (at least relative to output commodities), we have reason to believe that the input market reforms may not have made as much progress. If so, it is possible that returns to future market and trade liberalization for inputs could be substantial.

The overall goal of this paper is to assess how input trade liberalization induced by China's accession to the World Trade Organization (WTO), will affect producers in China. However, since the implementation of WTO has been so recent, and it is still too early to mea-sure any impacts even if we had data from China's first postaccession year, we must look to the past for answers. Given that the primary impact of trade liberalization of inputs is through lower prices, we meet our overall goal by pursuing three specific objectives that focus mostly on fertilizer prices. First, we identify changes in domestic input marketing and trade policies over the past two decades in order to determine the sources of past input price changes. Second, we assess the degree to which producers have benefited from these price falls by examining the extent to which China's input markets can be considered integrated and characterized by low transaction costs. This will help us determine whether the gains from lower fertilizer prices that come as a result of domestic or trade policy reforms can benefit inland farmers away from port areas or domestic production sites. Finally, based on the observations from the experience of trade and marketing reform in the past, we conjec-ture about how the new trade liberalization measures will impact future fertilizer prices