THE trade gap between Northern Ireland and the Republic narrowed in the first nine months of last year, according to the Irish Small and Medium Enterprises' Association (ISME).

Northern sales to the Republic rose by 18.5 per cent from January to September 1995 to £454 million, after a 26.4 per cent rise in the same period a year earlier.

The Republic's sales to the North increased by 10.3 per cent to £579 million, from a 2.4 per cent increase in 1994.

But the increase in the Republic's exports to the North last year was mainly due to the multinational sector with chemicals and pharmaceuticals experiencing 64 per cent growth, said Mr Frank Mulcahy, director of ISME.

The traditional, mainly indigenous sectors, continued to experience a decline, he said.

He said firms from Waterford Cork and Wexford are experiencing severe competition from Northern companies and not just those from the Border counties.

Companies in Northern Ireland benefit from lower tax and payroll costs, which give them a 20 per cent advantage, as well as generous fixed assets government backed financial aids, according to Mr Mulcahy.

"The level of support for MEs in Northern Ireland is three times that available in the south."

The Northern firms also have a to per cent competitive advantage due to the exchange rate which is weighted firmly, to the advantage of sterling, he said.

"While there is strong pressure to increase the flow of trade on the island of Ireland those promoting the effort must be sensitive to the effect on southern companies because of unfair competition as a result of the level of grant aid in the North and the rigged favourable exchange rate.