In this paper we extend the benchmark model of Diamond-Mortensen-Pissarides in a two-sector general equilibrium framework by introducing a frictionless segment of the labour market where all jobs are filled and all workers are employed. Match friction is the root cause of unemployment in the other sector of the economy. Here, both wages are flexible. Non-frictional wage is determined by the no-arbitrage condition and the frictional wage is determined by the Nash-bargaining solution. We also examine the effects of reforms policies on equilibrium rate of frictional unemployment and wage-gap in our friction oriented small open economy. We find that trade reforms via the reduction in the price of the product produced in the frictional sector reduce both the equilibrium rate of frictional unemployment and wage-gap. However, labour market reforms dig out a trade-off between wage-gap and unemployment rate in a small open economy having frictional labour market. These results may provide a strong theoretical basis for trade reform over the labour market reforms in a small open frictional economy.