Region: Harare semester: 1

ASSIGNMENT
COVER
REGION:
Harare
SEMESTER: 1
YEAR: 2
PROGRAM B com in Accounting Honours
INTAKE: 35
FULL NAME OF STUDENT: Nyaradzo Maviya
PIN: P2074167A
EMAIL ADDRESS: tsiga85@gmail.com
CONTACT TELEPHONE/CELL: +27682113890
ID. NO.: 42-2000877 E26
COURSE NAME: Entermediate Macroeconomics
COURSE CODE: BBFH208
ASSIGNMENT NO. 2 STUDENT’S SIGNATURE NMaviya
DUE DATE: 14 March 2022
SUBMISSIONDATE: 14/03/2022

Instructions
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I understand what is meant by plagiarism.

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1(a)
Trade Reforms is a collection of rules and regulations which pertain to trade,
this reform helps economic agents to base decision pertaining production and investment on market price signals, improves resource allocation, reduces anti-export bias, spurs domestic firms to restructure in the face of foreign competition, and increases national and international welfare through efficiency gains. Trade reforms encompasses improving transparency, increasing predictability and liberalising trade policy regime, Transparency is improved by reducing the complexity of regulalation shifting from quantily to price price based measures , predictebilityis gained by adhering to a clear and consistant direction for trade policy and liberasationis achieved by reducing protection levels and dispersion thereby increasing the role compertitive markrt forces at the expense of discretionaly state intervention
Trade policy must be cast in terms of medium-term efficiency goals and the reform policy instruments must be instituted to cater to nontrade policy objectives. b) Discuss any five reasons for trade reforms by many LDCs
Least developed countries (LDCs) have very high trade-to-GDP ratios, reflecting the fact that they are heavily dependent on trade. Over the past few decades, they have also embarked upon significant trade reforms. Although LDCs had relatively high economic growth during the past decade, unemployment, poverty, and inequality continue to be major development challenges in these countries. LDCs account for about 12 per cent of world population but less than 2 per cent of world trade, indicating that they have not fully reaped the potential benefits of trade for development. A key reason for this is that these countries have low productive capacity and have not effectively integrated trade into their national development strategies and plans against this reasons the following are the reasons for trade reform policies:
To improve balance of payment
Balance of payment, genesis problems and solutions (BOP) is a record of all transactions, made between a particularcountry all other countries during a time period BOP compares the difference of the amount of exports and imports including all financial export and imports,trade reforms help improve the balance of payments by strengthening the competitiveness of the external sector and expanding exports and efficient import substitutes
Trade policy reform,

when implemented well, has contributed to improved economic performance in developing countries and trade reforms proveded to correct balance of payment deficit in India. For example the trade reformswhere initiated in the India in 1990’s and were directed to achieve the basic objective of bringing about definite and permanent improvement in trade and payments situation in the country and in 1990-91, after the introduction of reforms in trade sector, there could be improvement in the balance of current account. In 1990-91, the deficit in balance of current account was of the magnitude of Rs. 17,639 crore. There was deficit both in respect of trade and invisibles in that year. After adopting the trade liberalisation policies, the deficit in the balance of current account started shrinking. By 2000-01, this deficit had gone down to Rs. 11,598 crores..
However most trade policy tightening where preceded by a deterioration in the currect account
To raise Economic growth
Trade reforms help to raise economic growth and employment generation by improving resource allocation and economy wide efficiency. According Rodríguez and Rodrik’s (2000) trade reforms have a positive impact on economic growth, on average, although the effect is heterogeneous across countries. From the 1950s and into the 1980s, most developing countries had in place an extensive array of policies that restricted imports (Krueger 1984). These policies went far beyond high import tariffs. They included foreign exchange controls and payment restrictions that accompanied overvalued currencies; quantitative restrictions, such as import quotas and licenses; and multiple exchange rates. In the late 1980s and early 1990s, however, developing countries embarked on a wave of trade reforms, as many countries moved swiftly to open their markets (Dean, Desai, and Riedel 1994). They often did so by devaluing their currencies and unifying their exchange rates, allowing exporters to retain foreign currency earnings, reducing licensing and quantitative restrictions. Trade reform promote sefficiency in a way that leads to an increase in potential GDP, which leads to an increase in the transitional rate of growth, which is a function of the gap between the current level of GDP and its potential level
Helps Nation’s International Trade
International trade allows countries to exchange good and services with the use of money as a medium of exchange. The benefits of international trade have been the major drivers of growth for the last half of the 20
th century.
International trade brings in different varieties of a particular

product from different destinations. This gives consumers a wider array of choices which will not only improve their quality of life but as a whole it will help the country grow. Trade reforms helps to be build thids inernational trade relations by removing trade barriers , and reduction of tariffs,
trade liberalization removes or reduces barriers to trade among countries, such as tariffs and quotas. Having fewer barriers to trade reduces the cost of goods sold in importing countries.
However trade liberalization can benefit stronger economies but put weaker ones at a greater disadvantantages.
Strengthen the compertiveness
Trade reform helps economic agents to base their production and investment decisions on market price signals, improves resource allocation, reduces anti-export bias, spurs domestic firms to restructure in the face of foreign competition, and increases national and international welfare through efficiency gains.
With reduction of trade barriers it allows countries to expand their markets and access goods and services that otherwise may not have been available domestically. As a result of international trade, the market is more competitive. This ultimately results in more competitive pricing and brings a cheaper product home to the consumer
Improves resources allocation
Greater ability to acquire required production resources – free trade (no trade barriers) allows producers who require for example, raw materials, to acquire them easier and at a lower cost.
That lowers production costs, increases efficiency, secondly exporters increase productivity by learning from overseas customers and through exposure to competition from foreign producers and lastly alongside productivity gains within firms, trade fosters reallocation of resources between firms, toward the most productive.