The data on international trade published last week by the National Statistics Office continues to confirm the resilience of the Maltese economy and especially the manufacturing sector in the face of the international economic slowdown.

In broad terms, the data shows that for the first 10 months of this year, exports have increased and the trade gap has narrowed when compared to the first ten months of last year. The data, however, offers the possibility for further assessment, even in the light of the data published in the Economic Survey last month together with the budget.

The data on international trade is particularly relevant for Malta on two main counts. First, the performance of our economy is directly dependent on our export performance.

In brief terms, the more we export, the more our economy grows and the better the economic fundamentals are, and vice-versa. Moreover, the more we export the more international our economy becomes, in that we generally also import more as we increase our exports, since we have to import most if not all of the inputs and capital goods that our exporters use.

Increasing exports would also help to make our balance of payments (that is our accounts with the rest of the world) more sustainable, given the foreign currency it generates. This would in turn mean giving solidity to the value of the Malta lira as increased foreign earnings would help maintain the country's foreign reserves.

In effect, our total external reserves increased to Lm1,315 million by the end of September of this year, an increase of 32 per cent over September 2001, also because of the increase in exports and the narrowing of the trade gap.

Second, there is a strong relationship between our international trade and our relations with the European Union. Statistics show clearly that our positive performance in the exporting sector over the years has been dependent on our ability to export to countries that are members of the European Union, mainly as a result of our Association Agreement signed way back in 1970.

The European Union has always been our major trading partner and this has occurred because the major source of our foreign inward direct investment is the European Union. Membership of the European Union would guarantee and strengthen this position.

The logical conclusion of these two points is that our economic performance is tied to our ability to export to the European Union, and therefore on our relationship with the European Union.

Let's start with the first issue, the relationship between our export performance and our economic growth. In the first nine months of this year, our total exports of goods (that is excluding services) represented 63 per cent of our gross domestic product at factor cost. The corresponding figure for the whole of 1998 was 59 per cent.

This means that over the medium term (and we have to take the medium term to obtain a more definitive trend as the short-term trends may contain the occasional blip, positive or negative) our growth in exports has been greater than the growth of our economy - hence the importance of exports to our economy.

The trade gap (that is the difference between exports and imports) has narrowed down to Lm262, by the end of October of this year, compared to Lm291, when compared to the end of October of last year. It is normal for Malta to have a negative trade gap, given the level of our imports of consumer goods and the lack of any energy resources, but a narrowing trade gap is once more an indication of our ability to maintain our competitiveness in the international economy.

The trade gap as a percentage of the gross domestic product stood at -18.3 per cent. In 1998 it stood at -23.7 per cent while in 1994 it stood at -31.7 per cent, a performance that shows an improving underlying trend.

Exports for the month of October of this year have continued to increase and the total for the first ten months of this year is of Lm753, compared to Lm736 for the first ten months of last year.

In volume terms the increase is likely to have been larger as most companies have reported increased activity but reduced international prices, some even to the tune of 40 per cent.

This is likely to have a positive impact on our national income, especially on employment income, even if information on this is published on a quarterly basis with the next set of data (for the whole of 2002) likely to be published in the first quarter of next year.

Moreover, the fact that exports have continued to increase is in itself a strong indication that firms operating in Malta are managing to sustain their competitive advantage.

It is even more important to note that the increase in exports has occurred in the latter months of this year, thereby indicating an improving rather than a deteriorating performance.

The second issue was the relationship between our exports and our relations with the European Union. Overall trade between Malta and the European Union represents 58 per cent of our total value of international trade.

Exports represent just under 50 per cent. This gives a strong indication of the importance of this relationship and of the need to not just maintain it but also strengthen it.

Membership of the European Union would continue to guarantee access for all Malta made products to this market that will grow to something like 400 million people in 2004. This access may well become restricted if we opt for non-membership and we do not accept certain conditions that the EU may wish to impose like it did in the case of Norway, Switzerland and Iceland.

In fact this particular aspect takes us to the very core of the whole issue. We should be pleased with our performance with regard to international trade this year.

However, we cannot be complacent about it and take it for granted. There are certain issues that we need to address internally such as maintaining the competitiveness of our producers.

However, irrespective of how competitive our firms may be, without access to markets, we would suffer greatly. Our economy is already highly integrated with that of the EU in terms of what we import and what we export.

The products that we produce are the result of this integration. We cannot jeopardise this position as it would mean loss of jobs. Guaranteeing access to the EU market through EU membership is of paramount importance if we wish to have jobs for the Maltese in Malta.