Pakistan is likely to loose its biggest market with the European Union declining to sign a Free Trade Agreement (FTA) with it, arguing that the size of Pakistan's economy is not big enough for such a deal.

Against the backdrop of the European Union's (EU) refusal to sign the FTA, Pakistan would be the only country in the region in the coming years to lose its biggest market, a senior Pakistan government official told 'The News' Thursday.

"Pakistan's reliance on the EU market and the US is too much and in case the EU market is lost, Pakistan would stand nowhere with regard to exports," the daily quoted an unnamed official as saying.

Commerce Secretary Asif Shah admitted that the EU has based its decision keeping in view the size of Pakistan's economy. "On this particular point we have successfully made EU top officials understand and convince them with facts and figures that Pakistan's economy is growing with rapid pace in the region and the size of the economy is also expanding."

Shah said, adding that Commerce Minister Humayun Akhter Khan would soon visit EU countries separately to remove the misgivings in this regard.

On the other hand, the EU has decided to ink a FTA with India that would facilitate greater demands for Indian products at zero duty.

"Right now apart from India and Pakistan, all the SAARC countries as LDC contracting states are

exporting their products to EU at zero duty and in case the FTA deal is struck with New Delhi, Indian products would also enjoy zero duty and capture the market of Pakistani products also. This is really an alarming situation for Pakistan," an official said on condition of anonymity.

Islamabad has communicated to Brussels that Pakistan is the frontline state against terrorism and in case trade cooperation is no extended to Pakistan, terror activities would further increase because of poverty in the country.

"The poverty situation would worsen in the country if trade under the FTA is denied," the daily quoted a Pakistan foreign office officials as saying.

Shah said the EU in response to Pakistan's request for the FTA has communicated that it frames FTAs with countries keeping in view its economic considerations. He said the EU is of the view that since Pakistan's tariff regime is liberalised, it does not need a trade deal with Islamabad.

Shah said this is sheer injustice to Islamabad. He also said that the EU has decided to initiate FTA talks with India.

"However, the process of talks, if initiated right now, will take three to four years to complete and by that time Pakistan would manage to convince and strike a FTA with EU countries through its trade diplomacy," he said.