Those who anticipate an influx of Chinese textiles after the restrictions on such commodities expire next year may well be wrong as some countries are expected to continue imposing protectionist measures and China’s apparel industry is not capable of flooding world markets with cheap homemade goods.

The Agreement on Textiles and Clothing (ATC), signed by WTO members to set limits on the amount of apparel and textiles developing countries export to the developed world, and all quantity restrictions on these commodities, will expire on January 1, 2005.

One of the most commonly used means in international trade protection over the last few decades, the quota system has long been maligned, as developed countries always protect their companies and jobs from more cost-effective foreign competition.

Such protectionism is against the basic principles of free and fair trade, which are the cornerstones of international trade relations.

Some experts estimate that textile exporters in developing countries could have several billion US dollars added to their annual income were it not for the quota system.

After the quota is lifted, consumers in developed countries could enjoy lower prices for the same products, not only as a result of increased competition, but also because the bureaucracy supporting the quota system will be eliminated.

It also means great opportunities for developing countries, especially those taking a lead in the world textile market, like China and India.

A paper by World Trade Organization (WTO) specialists released in August projects China will get a 50 per cent share of clothing exported to the US after the quota is lifted and India will grab 15 per cent of the market.

Of the clothing exported to European Union countries, China will have a 29 per cent stake while India will hold 9 per cent.

The National Council of Textile Organizations based in Washington gave even more alarmist figures, claiming China had, by June, already taken a 72.3 per cent share of the US apparel market, in categories that fall outside the quota system.

After all quotas are removed, the figure will further increase and the US textile and apparel industry will lose at least 650,000 jobs, the organization said.

On top of these statistics, interest groups, like textile manufacturers and importers, officials and academics in the developed countries and smaller textile exporting countries are concerned that the global textile market will be monopolized by the big textile exporting countries.

When such a fear is exaggerated unproportionately by certain institutions aware of their own vested interests, people naturally point fingers at China.

And more are manipulated into believing that China will become a dangerous giant dominating the world market as soon as the textile quota is phased out. The theory follows that jobs and money will flow to China, threatening fair trade as well as the interests of other countries.

This is not the case. Those who are eagerly seeking measures to fight the "new threat from China" should sit back and look at the whole picture. Within the next few years, the future they foresee will not come to pass.

First of all, the means of trade protection are so diversified that import quotas are one of the least complicated.

An important fetter for Chinese exports is a special provision signed upon China’s entry into the WTO in 2001.

The provision allows other WTO members to impose either tariffs or quotas on any Chinese imports until 2013 that are causing harm to domestic industries.

Peru used this provision on December 23, 2003. It imposed quotas on 106 categories of textiles from China, cutting their import volume by 70 per cent.

The US market, which is said to be dominated by Chinese products, has an extra safeguard. The US Government can limit the annual import growth of Chinese textiles to 7.5 per cent before 2008.

An annual growth ceiling of 7.5 per cent was slapped on Chinese brassieres, dressing gowns and knit fabrics last year.

Chinese socks were accused of "disrupting the US market" last Friday by the US Committee for the Implementation of Textile Agreements. As a result, socks are now being threatened with an import restriction.

Most developed countries have also established anti-dumping laws and institutions to deal with anti-dumping complaints from domestic manufacturers.

Cases of Chinese producers being sued for product dumping in the United States or other countries have been ever-present since China began trying to grab a share of foreign markets.

Zhou Shijian, vice-president of the Beijing-based World Trade Organization Research Association, has said the protectionism against Chinese textile products would worsen intensively after the quota system is phased out.

But even if Chinese exports were not facing harsh protectionist measures, the strength of the Chinese textile and apparel industry is not strong enough to turn the country into a monopolizer of the world textile market.

Chinese mills imported textile equipment worth US$4.4 billion in 2003, up from the 1999 figure of US$1.3 billion, which indicates the industry’s determination to seize more market share after the quota is eliminated.

The textile industry in China is still a labour-intensive industry offering entry-level jobs to unskilled workers.

Yet the textile and clothing industry includes areas that depend on design, research and development (R&D) and marketing skills for competitiveness and added value, like fashion garments and sportswear.

And despite the painful restructuring of the last few years, the Chinese textile industry is yet to create any famous designs or brands. Lacking the capability to produce high-end textiles and luxury apparel, Chinese manufacturers could not gain a firm foothold in the elite market.

Most Chinese mills still knit fabrics with imported cotton, which means modest profits and possible price wars amongst each other, further dampening the idea that China will assume the role of a textile superpower on the world market.

And low labour costs are no longer a guarantee for fat profit margins.

Also, gone are the days of an abundant labour force ready to accept long overtime and humble pay.

Chinese newspapers have reported that labour-intensive plants in coastal areas are having difficulties with worker shortages this year.

The supply of labour is probably declining due to the following two reasons. Firstly, the first generation of the one-child policy is now entering the workforce, meaning, obviously, a shrinking of the labour pool.

Secondly, as the future looks brighter for China’s farmers, less and less migrant workers are willing to work in the textile industry, thus removing a traditional labour source.

Although the manufacturers, authorities and academics have long realized the problem and are trying to figure out a solution by upgrading and restructuring the industry, these efforts will not bear fruit overnight.

Moreover, the new protectionism and the industry’s focus on low-end products are only two of the more urgent problems facing the Chinese textile industry. Issues keep popping up, one after another, which will force the industry to solve its own problems and sharpen its competitive edge before looking to take on the world market.