ISLAMABAD, Feb 9: Pakistan will challenge the European Union's decision to impose 13.2 per cent anti-dumping duty on Pakistani bedlinen that comes into effect in March this year after approval from the European Commission's Council of Permanent Representatives later this month.

Commerce Minister Humayun Akhtar Khan told a news conference here on Monday that the government was also launching a major diplomatic effort to stop imposition of the duty on a major Pakistani textile product.

Responding to a question on free trade agreement (FTA) with Sri Lanka, the minister said the finalization of lists had been delayed mainly because of political crisis in Sri Lanka.

He, however, agreed that duties on the import of agriculture products like potato, onion and rice were very high and Pakistan sought reduction in these duties. He said Pakistan, in return had delayed duty concession on Sri Lankan tea and hoped that the issue would be resolved on a give-and-take basis whenever the talks resumed.

The commerce minister said exports during the month of January had amounted to $1.093 billion as against $0.946 million in the same month last year, showing an increase of 15.52 per cent.

Mr Khan said imports in January 2004 amounted to $1.344 billion as compared to $1.053 billion in the corresponding month last year, registering an increase of 27.65 per cent.

As such, the trade gap widened by 135 per cent during the month of January as it amounted to $250 million this year as compared to $106.6 million in the same month last year.

In overall terms, the exports during the first seven months of the current fiscal year amounted to $6.974 billion compared with $6.144 billion of the same period last year, showing an increase of 13.52 per cent.

The minister said the seven-month export target was set at $6.813 billion which has been surpassed by two per cent. He said the $12.1 billion export target for the current fiscal year would be easily achieved.

The imports during seven months (June-January) amounted to $7.949 billion this year as compared to $6.841 billion in the same period last year, showing an increase of 16.20 per cent.

Consequently, the trade gap increased by 39.84 per cent during the first seven months of the current fiscal year and stood at $974 million against $697 million of the same period last year.

The commerce minister said widening of the trade gap should not be a matter of concern in view of the country's very comfortable balance of payments position.

Mr Khan said increase in imports was mainly because of 86 per cent increase in agricultural and other chemical raw materials and 106 per cent increase in machinery, of which 31 per cent rise took place in textile machinery imports.

All these factors, he said, indicated higher industrial activity which was an encouraging development despite slowdown in the international economy and regional unrest due to the Afghanistan and Iraq situation.