INDIVIDUAL MACROECONOMICS ASSISGNMENT

HP-GSB STAMP

I declare that this assignment is my own work. I further declare that where material has been
used from other sources, whether by paraphrasing or by direct quotation, it has been fully
acknowledged and referenced. I have retained a copy of this assignment for my records.

Student’s Signature: ……Date:30 October 2022…………………..

SURNAME: Mabuku
FIRST NAME: Ammon Mwiya
STUDENT NUMBER: 212001574
COURSE TITLE: Master of Business Administration /Cohort9
MODULE TITLE EFB911M
MODULE FACILITATOR: Prof Tafirenyika Sunde
ASSIGNMENT DUE DATE: 3 November 2022

1
TABLE OF CONTENT

1. Costs and benefits of international trade for a small developing nation like
Namibia
2. Could the implementing protectionist policies be advantageous for small
businesses in Namibia
3. References

2
1. Discuss the costs and benefits of international trade for a small developing nation
like Namibia. [25]
Costs:
 loss of jobs and economic inequality brought on by competition: local
businesses around the country adapt to this transformation as states focus on
free trade. Forjan (2014) states that the drawback of this is that imports
compete with their products produced locally which affects their source of
income and job creation. It is unfortunate that this situation tends not to last
because costs incurred by international trade always have a significant
negative impact on the level of living of the people in small countries like
Namibia. Under these circumstances, foreign trade is more likely to cause
turbulence and discontent than peace and goodwill. It is well known that the
Ovaherero people had extremely negative views toward the Germans before
they left Ovaherero.
 Less effective companies exit the market: and this because resources are
redistributed based on whether a company is growing or shrinking. Some
nations suffer more losses than others as businesses close. When more
companies enter the market, they add pressure on existing companies an
example is Kentucky Fried chicken (KFC) versus Papa G which is a local
grilled chicken supplier. Papa G closed 80% of its franchises around the city
because KFC started growing its franchise in almost every location.
 An increase in imports causes domestic industries to compete against
imports: Namibia as a developing nation might not have particularly
advanced technology or financial systems. As a result, they are unable to
compete fairly with some industries in industrialized nations. Developed
countries will act as an economic bully to developing countries such as
Namibia. for example, Germany cannot compete fairly with Namibia when it
comes to digitized trading because its more advanced and equipped with the
latest technology.
 Shipping Customs and Duties
International countries customs agencies charge extra fees on items shipped to
them Although each country sets its own charges and taxes, they are often

3
 based on the value of the goods sent (item, insurance plus shipping). Based on
what it is made of or used for, the item description may also have an impact on
these charges. Forjan (2014) still maintains that a corporation must know what
the overseas shipping company will charge the final customer in addition to
the price of their product. An illustration of this is the shipment of local
diamonds, which are sent to foreign nations in their unrefined state and sold
back to the country at a high price after being refined and paying a significant
number of duties and taxes.
 Foreign trade may completely exhaust a country’s natural resources:
natural resources like coal and oil which are irreplaceable may become extinct
in the long run. These goods are exported for the sake of profit. But the
country suffers in the long run when their source is dried up completely.

Benefits:

 High prices for exports and lower prices for imports are net gains for a
country: These interactions lead to efficient resource allocation. Because a
Namibia acquires such a significant quantity of goods from such trade
engagements, its population's overall welfare rises.
 Trade liberalization increases real GDP: The GDP is influenced favourably
by resource allocation effectiveness. The movement of technological
knowledge and the interchange of ideas are made possible by international
trade. Income is impacted by commerce through shifts in relative prices.
Improvements in the terms of trade, namely the price of imports in relation to
the price of exports, cause resources to be redistributed toward products where
a country has a comparative advantage.
 Trade encourages efficiency: As a result of specialization, Namibia can
concentrate more on manufacturing the things they do best rather than those
they find difficult to create. Trade can introduce importers and exporters to
fresh perspectives and cutting-edge equipment, supplies, or methods that boost
productivity. When a business incorporates pre-existing technology or know-
how, some of this learning is simply copying. Additionally, as about half of all
Namibian imports are used as inputs in manufacturing, imports can lower
firms' costs by making a wider range of items available at lower rates, which
can encourage Namibian enterprises to increase production and employment.

4
  Consumers access a variety of goods and services at lower prices: People's
living standards are raised as a result. In addition, the absence of barriers and
tariffs facilitates production and shipping, assuring ongoing accessibility to
goods and services. Trade opens new markets for foreign producers,
encouraging them to produce more, which raises the supply. The lower prices
of these products, meanwhile, fuel increased demand among consumers. The
access free domestic producers from competing with cheaper goods, enabling
them to charge the prices they want, while consumers pay more for products
than buyers in other countries who have access to cheaper goods.
 Development of the means of transport and communication: The
producers in a nation strive to make goods of higher quality while spending as
little money as feasible due to worldwide competition. This improves
effectiveness and provides advantages to consumers everywhere. So, in this
case the best communication and transportation systems are necessary for
international trade. The benefits of global trade also make it possible for
communication and transportation technology to advance.

2. Do you believe that implementing protectionist policies could be advantageous

for small businesses in Namibia? Justify your answer.

No, it will not be advantageous

Smaller countries such as Namibia normally implement protectionist policies to

encourage investment in a specific local industry. For instance, tariffs on the foreign
import of shoes would encourage local producers like Shilongo Leather works to
invest more resources in shoe production for their Shilongo Leather Shoes. Local
consumers are worse off because of protectionist measures, as they may have to pay
higher prices for slightly subpar goods or services, even though local producers are
better off because of these policies. Therefore, protectionist measures frequently have
great popularity among businesses while enjoying great disapproval among
consumers. Consumers are the purpose of every business so if they suffer a great
dismay from a business than that business will not survive. Namibia is a developing
country seeking to make a name for itself on the global markets therefore protectionist
policies will save as a barrier to enter the global trade for local established business.

5
Below are reasons why implementing protectionist policies will not be advantageous
for small businesses in Namibia:

 Less growth opportunities: the only competitors for small business in

Namibia is the small firms which don’t really have enough resources and
capital capacity to boost growth of a business. Protectionism provides local
industries with growth opportunities until they can compete against more
experienced firms on the international markets. Small local industries can’t
survive against the already-established international competition such as Nike
without some help getting to scale, therefore intervention of Protectionism in
the trade balance is necessary to foster innovation between businesses.
 Lower GDP: Higher import prices raise businesses' production costs and
lower households' purchasing power if goods produced by local businesses
cannot be quickly and easily replaced. These impacts have a significant overall
negative impact on GDP because they weigh on investment, employment, and
consumption. Protectionist policies tend to boost the economy’s GDP due to a
rise in domestic production. It often leads to political and cultural isolation,
which, in turn, leads to even more economic isolation.
 High cost of job creation: While protectionism may help the Namibian
economy save or create employment, it may also hinder progress and cause
price inflation as native goods become more expensive. Krugman (2022)
concludes that any business jobs created will be expensive because inflation is
a real possibility for the survival of a firm. Those who oppose protectionism
contend that it would be preferable to establish a system of trade agreements
that would be advantageous to all parties not the firms only.
 Realities of the global economy: As a result of globalization and
international enterprises, supply chains frequently cross continents. So,
limiting trade between nations can prevent businesses from acquiring the
goods they require. Local producers don't have to worry about overseas
competition; thus, they are not motivated to innovate or invest in the research
and development of new items.
 Limited choices for consumers: Guarino (2018) maintains that due to
possible import limitations, the range of items and goods available to
consumers offered local businesses will be constrained. Consumers will only

6
have a relatively small selection of the amount, quality, and type of products
that would otherwise be available to them without trade protectionism as a
result of these limits and this will contribute heavily to customer
dissatisfaction. Consumers will also confront the issue of having to pay more
for the scarce supply of goods and products, which might lead to a significant
rise in inflation. Since they might need to buy components to create their
products and then transfer the extra cost onto consumers, Namibian businesses
could also suffer financially. Overall, the ability of consumers to spend money
is made possible by the price of many commodities and products being kept
low by global competition.

7
References

“What drives trade growth” (2014). Available at: https://doi.org/10.18356/e4cdfb32-

en.

FocusEconomics (2018) The economic effects of trade protectionism:

Focuseconomics, FocusEconomics | Economic Forecasts from the World's Leading
Economists. Available at: https://www.focus-economics.com/blog/effects-of-trade-
protectionism-on-economy (Accessed: October 30, 2022).

Cambazoğlu, B. (2022) “Trade protectionism,” Research Anthology on

Macroeconomics and the Achievement of Global Stability, pp. 75–90. Available at:
https://doi.org/10.4018/978-1-6684-7460-0.ch005.

Team, T.I. (2022) Protectionism, Investopedia. Investopedia. Available at:

https://www.investopedia.com/terms/p/protectionism.asp (Accessed: October 30,
2022).

https://corporatefinanceinstitute.com/resources/knowledge/economics/protectionism/