US clothing demand continues to grow. Sales through clothing, accessory stores, warehouse clubs and superstores were especially buoyant in the first nine months of 2006. US producers benefited as clothing output rose by 4.6% in the first ten months while the imposition of quotas against China slowed import growth. But imports of cotton bed linen from India, Pakistan and Brazil surged.

The EU trade deficit worsened in 2005 after the global elimination of quotas at the end of 2004. But the industry’s prospects looked brighter in early 2006 as output stopped falling and orders picked up. Exporters are achieving success in East European markets such as Russia and Ukraine, and the surge in imports from China has slowed since quotas were imposed in mid-2005. Meanwhile, EU firms are investing in higher value interior textiles and technical textiles in the EU while continuing to relocate lower value textile and clothing production to Asia and Eastern Europe.

Chinese exports surged in the first seven months of 2006 as exporters looked to alternative markets such as Turkey, Mexico, Macau and South Korea in order to maintain growth in the face of US and EU quotas. Output and foreign direct investment continued to grow strongly. China’s clothing import market also expanded—by 24.0% in the first seven months of 2006—reflecting the re-emergence of co production schemes in Hong Kong and Macau to avoid quotas against Chinese goods.

Indonesian clothing exports expanded at a healthy pace in January - May 2006 thanks to strong demand in the USA. Foreign direct investment also rebounded, although overcapacity remains a danger. Indonesia’s vertical industry and commitment to labour rights and customer service bode well for the future. Malaysian exporters are trying to gain an edge over cheaper competitors by focusing on branding, quality, reliability, labour rights and superior customer service. Clothing exports from the Philippines have done well in the USA and the EU. Thai garment makers have enjoyed a resurgence in 2006 and hope that a trade deal will boost exports to Japan. But high costs are forcing firms to invest in China, Cambodia and Vietnam. Vietnamese exports to the USA soared in the first half of 2006 in anticipation of quota elimination when Vietnam joins the World Trade Organisation (WTO).

Bangladesh has performed well in the post-quota era, despite fears of competition from China and India. In 2006 it has raised its share of the US market and sales to the EU market, helped by duty-free access, have soared. But low wages have caused labour riots. India’s textile and clothing export sector has grown substantially since the elimination of quotas in the EU and US markets. Government help with modernisation and the provision of textile and apparel parks should improve competitiveness. Pakistan is also enjoying brisk growth, despite Chinese and Indian competition, and sales to the EU picked up in 2006. In Sri Lanka growth was more modest and the country relies heavily on raw material imports. A new campaign will publicise Sri Lanka’s compliance with ethical labour standards.