Inter Trade Ireland, the cross-Border trade and development body set up under the Belfast Agreement, will examine a proposal to reduce corporation tax in Northern Ireland.

The cross-Border body's chairman, Dr Martin Naughton of Glen Dimplex, said the body would research the tax issue, among several other important proposals, to develop a new approach to boost investment and economic development in the North.

"The twin approaches of taxes and talent have been used successfully in the Republic as incentives and inducements," said Mr Naughton. "We will do research on that."

The Inter Trade Body has no powers to implement policy but would instead make proposals to the North-South Ministerial Council for the consideration of government ministers.

A proposal to lower corporation tax, which is between 20 and 30 per cent in Northern Ireland compared with what will be a flat 12.5 per cent rate in the Republic by 2003, would be politically sensitive.

Unionists may perceive the introduction of a similar corporate tax rate between Northern Ireland and the Republic as a step towards political union. Under European Union regulations, regional corporation tax rates are not allowed within the same country.

Mr Naughton said the body had already submitted three reports to the council. These include reports on e-commerce, venture capital and graduate placements between Northern Ireland and the Republic.

He said the body had rejected proposing the establishment of a venture capital fund to finance business development in the Border areas.

"We concluded there was sufficient funding available," he said.

"The body's role would be to guide companies."

Mr Naughton was speaking on the eve of Inter Trade's first roadshow to boost North-South co-operation. The roadshow will visit Limerick, Belfast and Derry over the next three weeks.

At a dinner last night to mark the launch of the roadshow, the Tanaiste, Ms Harney, said a vast reservoir of potential exists in the new relationship between North and South and everyone could be winners.

The managing director of Tesco Ireland, Mr Maurice Pratt, outlined several structural and strategic challenges that needed to be addressed in both jurisdictions.

"The traces of protectionism continue to linger at production and retail levels in both markets," he said. "Competition needs to be fostered and given a sharper edge both in market and regulatory terms."