Among the various data published by the National Statistics Office were the data for August for international trade. I believe that the publication of August data by the middle of the fourth week of September is indeed a very commendable effort by the NSO. However, the issue is not this, but rather the trends that have started to emerge on international trade.

One may wish to wait till the end of the year to have a more definite trend before pronouncing oneself. Cautious persons would think that would be wise.

Even in other countries, some have made the mistake of thinking that we have reached the trough of the international economic slowdown, only to find out that we still had further down to go. However, I shall throw some caution to the wind and assess whether we really have started to move upwards again so far as our exports are concerned, in spite of the fact that the economy of our major markets are still not showing signs of any long term and durable recovery.

This is because the data for August on international trade reflect a position similar to that which emerged in the data for July, while there is anecdotal evidence to suggest that the positive signs emerging in these two months are not autumnal birds of passage.

The data for both July and August of this year shows that we have had an increase in imports but an even larger increase in exports. This has meant that the visible trade gap, that is the difference between exports and imports of goods (but excluding services), has shrunk during these two months when compared to the same two months of last year. This is good news for our balance of payments.

What is also worth noting is that in August the imports of both industrial supplies and capital goods have increased over the August 2001. This is crucial as any thing that we manufacture for export relies totally on imported raw materials, either in primary form or in semi-finished form.

Thus, given the just-in-time processes that most of our exporting manufacturing sector has adopted over the last years, it is hardly likely that such imports of industrial supplies are being put into stock. They are being processed for export and therefore an increase in such imports has also meant an increase in our domestic exports.

The same applies for the increase in the imports of capital goods. Admittedly, data is not provided on the final use of such capital goods, but since these represent investment expenditure, the assumption is that most of these goods are likely to have gone into the manufacturing sector.

Moreover, the increases that we have had in the imports of industrial supplies and in the imports of capital goods during August 2002 have not been small either. The increase in the imports of industrial supplies has been of 11.5 per cent while the increase in the imports of capital goods has been of 17.5 per cent. In July the imports of capital goods were at the same level as last year but the imports of industrial supplies had shown an increase.

These imports are then being transformed into an increase in exports. The increase in total exports for August 2002 over August 2001 was of 21.4 per cent. In July the increase was of 21.9 per cent.

In total we have had an increase in exports during these two months was of 21.7 per cent. Some of this went into re-exports, but domestic exports, that is exports of goods produced in Malta, have also performed very well.

Domestic exports increased by 14.2 per cent in August and by 21.6 per cent in July, for an increase of 17.9 per cent for the two months. The European Union still absorbed a substantial part of these exports.

What makes me believe that this result is not to be likened to a bird of passage is the fact that most exporting manufacturing companies have reported increased activity and are going through an expansion of activities in their Maltese plants. The effort that has been put in by these companies over the past months is therefore bearing fruit.

This does not mean that we are over the worst. The international economic slowdown is continuing and Maltese companies have had to work hard to maintain their export competitiveness.

Moreover, in certain sectors the indications on consumer and industrial demand for the last quarter of the year are that it could well be fairly flat.

This means that Maltese exporting companies are not riding on the crest of buoyant international demand but are needing to win orders from their competitors. In certain respects this has been achieved by reducing prices; a point that brings us to another issue.

We have had an increase in exports in value terms in spite of a reduction in prices. This implies that in volume terms the increase in exports has been even better; yet another reason why the results of July and August of this year may not be temporary.

A continuing trend of this nature for the rest of the year could well cancel out the drop in domestic exports that we have had in the first half of this year (in terms of total exports we are already practically at the same level as last year).

However, two issues need to be addressed to maintain this momentum in the short term and consolidate it in the medium and long term.

The first is strengthening our competitiveness. The setting up of the National Competitiveness Council proposed by the Malta Federation of Industry is essential in this regard.

The second is membership of the European Union. It gives our manufacturing sector a sense of stability that is required for sustainable development.