China is expected to become the "supplier of choice" for most U.S. textile and apparel importers (large apparel companies and retailers) following the expiration of quotas under the Uruguay Round Agreement on Textiles and Clothing (ATC) in 2005, according to the U.S. International Trade Commission (ITC) in its report Textiles and Apparel: Assessment of the Competitiveness of Certain Foreign Suppliers to the U.S. Market.

The ITC, an independent, nonpartisan, factfinding federal agency, released a public version of the report today. The report is the result of the ITC's general factfinding investigation, Textiles and Apparel: Assessment of the Competitiveness of Certain Foreign Suppliers to the U.S. Market (Investigation No. 332-448), which was conducted at the request of the United States Trade Representative (USTR). A confidential version of the report was submitted to the USTR in June 2003.

As requested by the USTR, the report assesses the textile and apparel industries of certain foreign suppliers to the U.S. market with respect to their competitiveness and other factors pertinent to their adjustment to the final completion of the phaseout of quotas on January 1, 2005, as required by the ATC. The foreign suppliers covered by the report are significant ATC suppliers to the U.S. market, Mexico, and other supplying countries with preferential market access. Highlights of the report follow.

• China can make almost any type of textile and apparel product at any quality level at a competitive price. However, the extent to which China continues to expand its shipments following quota elimination in 2005 will be tempered by the uncertainty over the use by the United States of a textile-specific safeguard provision contained in China's WTO protocol of accession.

• To reduce the risk of sourcing from only one country, U.S. importers also plan to expand trade relationships with other low-cost countries as alternatives to China, particularly with India, which also has a very large manufacturing base for textiles and apparel and a large supply of relatively low-cost skilled labor. One or two other low-cost exporting countries in South Asia (Bangladesh or Pakistan) are expected to emerge as major suppliers for a narrower but still significant range of goods.

• In the ASEAN region, the only countries considered competitive as major alternate suppliers to China or India are Vietnam and, to a lesser extent, Indonesia. However, although both countries have an abundant supply of low-cost labor, Vietnam will not be eligible for quota elimination until it becomes a WTO member, while Indonesia is considered somewhat risky because of its political and social unrest.

• Although many countries may see their share of the U.S. market decline, a large number of countries likely will become second-tier suppliers to U.S. apparel companies and retailers in niche goods and services. As U.S. firms strive to balance cost, flexibility, speed, and risk in their sourcing strategies, they will look to the second-tier suppliers to meet those needs not met by the first-tier suppliers.

• Some U.S. importers indicated they would also consider Caribbean Basin countries, particularly those located in Central America, as a major source of supply if a Central American or hemispheric free-trade agreement is negotiated that allows the use of third-country fabrics. Regardless of the outcome of any regional free-trade agreements, the production of certain goods likely will remain in Mexico and the Caribbean Basin region to service U.S. buyers' quick turnaround or mid-season order requirements. Turkey and Colombia also are considered capable suppliers for quick turnaround business.

Textiles and Apparel: Assessment of the Competitiveness of Certain Foreign Suppliers to the U.S. Market (Investigation No. 332-448), USITC Publication 3671, January 2004) is available in the Publications section of the ITC's Internet site at www.usitc.gov. A CD-ROM version or printed copy may be requested by calling 202-205-1809 or by writing to the Office of the Secretary, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436. Requests may be faxed to 202-205-2104.

ITC general factfinding investigations, such as this one, cover matters related to tariffs or trade, and are generally conducted at the request of the U.S. Trade Representative, the Senate Committee on Finance, or the House Committee on Ways and Means. The resulting reports convey the Commission's objective findings and independent analyses on the subjects investigated. The Commission makes no recommendations on policy or other matters in its general factfinding reports. Upon completion of each investigation, the ITC submits its findings and analyses to the requester. General factfinding investigation reports are subsequently released to the public, unless they are classified by the requester for national security reasons.