Figures for the first three months of 2005 suggest the end of international textile quotas at the end of last year has caused a seismic shift in export markets. The upheaval has been so great that the US and EU are seriously considering the reimposition of some quotas on textiles from China, which has been the major beneficiary of the changes. Of the losers, Mexico stands out as one of the countries most affected by China's success.

Over the first quarter China's share of the US import market in three categories (cotton knit shirts and blouses, cotton trousers, and cotton and man-made fibre underwear) surged by between 300% and 1,500%. In February its garment exports to the US leapt by 147% to US$650m. Exports to Europe were up 188% to US$783m. Figures for January were similarly dramatic. Nor was China the only Asian country to benefit from the lifting of tariffs: India posted a 129% rise in exports of cotton knit shirts to the US over the first quarter.

The surge has been at the expense of other countries, most notably Mexico. Mexico has been losing US market share to China for years: Chinese accession to the WTO in 2002 saw its textile exports to the US rise 27% in the first quarter of that year, overtaking Canada to become the biggest source for US textile imports and pushing Mexico into third place. The end of the Multi-Fiber Agreement seems merely to have accelerated this displacement: Mexico, with labour costs around four times higher than those in China, has lost a third of its textile jobs since 2000. Its exports to the US of cotton and man-made-fibre shirts, underwear, bras and dressing gowns all showed double-digit declines over Q1.

China has capitalised on the end of quotas in markets other than the US. In Europe, imports of Chinese pullovers boomed by 534% in the first quarter, with a 413% rise in imports of men's trousers. Its total shipments of apparel rose to US$783m, an increase of 188%. 

China's gains in the first three months of this year have proven sufficiently impressive for both the US and the EU to talk about reimposing trade barriers to Chinese textiles. Trade Commissioner Peter Mandelson confirmed on 25 April that the EU had now received enough data from member states to consider taking action against Chinese exporters. "Although the picture is mixed, in some categories of textile and clothing imports they do give us cause for concern."

On 4 April, the US Committee for the Implementation of Textile Agreements announced that it was to begin safeguard proceedings to establish whether Chinese textile and garment exports were threatening to "disrupt" the US market. "This decision is the first step in a process to determine whether the U.S. market for these products is being disrupted and whether China is playing a role in that disruption," said Commerce Secretary Carlos Gutierrez. The reference to "disruption" is significant: under the terms of China's accession to the World Trade Organisation, WTO members can impose specific safeguard measures (ie quotas) on Chinese textiles and if they determine such shipments are disrupting their markets.

Even if the US and EU impose new restrictions on Chinese textile and garment exports, this is likely to benefit countries like India and Bangladesh more than Mexico. Central American countries such as Honduras and El Salvador are also likely to benefit, but much depends on the nature of the new restrictions the EU or the US decide to impose on China. Beijing has strongly condemned the prospect of such measures, which it describes as "protectionist", but even if the US and EU were to impose some new barriers under WTO rules they could only be temporary.