US textile and apparel imports from China more than doubled in volume during the first eight months of 2002, with apparel imports surging 47% and textile imports soaring an astronomical 145%.

China's rapid advance is sending shivers down the spines of textile and clothing industries in countries across the globe according to a new report published in Textile Outlook International.

To make matters worse, the increase in imports from China appears to have been at the expense of apparel imports from Mexico and Caribbean countries -- which contain a large amount of US yarn and fabric. The US textile content of imports from China, by contrast, is low. In volume terms, US textile and apparel imports from Mexico rose by only 0.3% during the first eight months of 2002. The feeling in Mexico is that the boom created by Nafta (North American Free Trade Agreement) in the second half of the 1990s has run its course.

And in the case of the Caribbean, US imports from this region actually fell by 1.3% -- despite being granted more favourable treatment under Title 2 of the Trade Development Act 2000.

Concerns about China's rapid advance are by no means confined to the industrialised countries in the West. Considerable concern is also being expressed by the textile and clothing industries in developing countries, especially in South East Asia.

Further analysis of the statistics helps to explain why. Although US textile and apparel imports from China more than doubled in volume terms, the average price of those imports plummeted by 37%. Chinese exporters have had to drop their prices in order to gain a greater share of a weak market. Significantly, US retail prices of clothing are now at a four year low.

What is particularly alarming for competing countries is the magnitude of the fall in prices of US textile and clothing imports from China. This is attributable to a combination of circumstances. First, the US market weakened in 2001 -- especially following the terrorist attacks of September 11. As a result, suppliers have been fighting to maintain market share.

Second, the two other leading world markets -- the EU and Japan -- are in the doldrums. The market in Japan is especially depressed and demand for imports has fallen as a result. The global market is in a state of oversupply and competition is intensifying. Exporters are having to reduce prices to maintain sales.

Third, prices of Chinese goods are under pressure within China itself because of fierce competition among a plethora of inefficient small and medium sized producers.

Fourth, buyers have more suppliers to choose from because new players are entering the market. A prime example is Sub-Saharan Africa, which, under the African Growth and Opportunity Act (AGOA), has been granted quota-free and duty-free access to the US market for products which meet specified rules of origin. Duty-free access gives exporters a significant price advantage over suppliers who are subject to the USA's normal tariffs.

Although Sub-Saharan Africa's share of the US market is still small, the region has attracted a lot of attention from the global textile and apparel industry. Sub-Saharan Africa's new high profile has, in turn, attracted the attention of US sourcing agents. As a result, exports of apparel from Sub-Saharan Africa to the USA have grown rapidly under AGOA.

Finally, to add to the oversupply problem, Chinese exports of a wide range of products suddenly came off quota in January 2002. Freed from restrictions, exports soared and, in a weak market, prices fell. Moreover, because they no longer had to bear the cost of buying quota, many Chinese exporters were able to drop their prices without sacrificing margins.

The big increase in China's quota-free trade stems largely from its entry to the World Trade Organisation (WTO) in late 2001. Indeed, China managed to get into the WTO just before January 1, 2002 -- the date fixed for the third stage of quota elimination under the Agreement on Textiles and Clothing (ATC).

Also, China had some catching up to do. Developing countries which joined the WTO when it was formed in 1995 had already benefited from the first two stages of quota elimination -- in January 1995 and in January 1998. But China suddenly started to benefit from all three stages of quota elimination on one day -- January 1, 2002.

The surge in US imports from China and the plunge in prices provide a foretaste of what lies ahead after the "big bang" on December 31, 2004, when all quotas restricting trade between WTO members are finally eliminated.

Paradoxically, the losers are more likely to be producers in poorer developing countries rather than companies in industrialised countries. The poorest countries have little choice but to compete head on with China by offering lower prices -- at least in the short term. By contrast, most companies in developed countries have moved offshore or have restructured their operations to focus on products of higher added value. The same is true of many big players in newly industrialised countries such as Hong Kong, South Korea and Taiwan. Even lower cost countries such as Malaysia believe that their future lies in the development of high-tech industries rather than in textiles and clothing.

The most vulnerable, however, are newly emerging suppliers who are trying to get a foot on the ladder -- and those in Sub-Saharan Africa fit into this category. Indeed, a repeat of the Chinese expansion which was witnessed in the first eight months of 2002 could frighten off would-be investors in the region and undo all the good which AGOA has so far achieved.

It was hoped that revisions to AGOA -- signed by President Bush in August 2002 -- would lessen those dangers by enhancing the benefits available to Sub-Saharan African exporters. AGOA II does offer a few improvements. It has doubled the duty-free and quota-free "cap", and extended AGOA benefits to include merino wool sweaters, knit-to-shape articles, and items made from a mixture of US-cut and Sub-Saharan African-cut components. But the desired extension beyond September 2004 of the Special Apparel Provision -- allowing garment exporters in poorer countries to use materials sourced from anywhere in the world -- did not occur.

One merit of the quota system which has prevailed for almost 30 years is that it can be manipulated to guarantee a share of the vast EU and US markets for producers in smaller emerging countries. Without a quota system, these smaller emerging players could easily get squeezed out -- as the trend of US imports in the first eight months of this year has demonstrated.

The main hope for the embryonic industries in Sub-Saharan Africa is that the authorities in the main markets will make use of the special safeguard mechanism to curb excessive expansion by China. Alternatively, China may itself adopt a policy of self-regulation in order to cool US protectionist sentiments and avoid the risk of retaliatory action.

Action on either side would go some way towards reassuring would-be investors that African companies will still be able to grow their shares of EU and US markets. And foreign investment is badly needed for there to be any hope of raising income levels in a region which comprises some of the world's poorest countries.