China, India and Pakistan will pose the greatest threat to the European textile trade once quotas are removed in 2005.
This competition may force the European Union to lower manufacturing costs on textile products to stay competitive, according to a new report released by the Directorate-General Trade of the European Commission. China and India are currently the major supplying partners to the EU.

In a report titled, `The future of the textiles and clothing sector in the enlarged European Union'', China is the focus of the current EU debate. A key supplier to the EU, the country has huge production capacities and a large and cheap workforce. Since joining the WTO in 2001, it has benefited from the progressive elimination of quotas in accordance with the Agreements on Textiles and Clothing (ATC).

"In 2002, import of product categories liberalised for China under the third stage of the ATC increased by 46 per cent in value and 192 per cent in volume terms, with an average unit price drop of 50 per cent," the report said.

It said that in all the product categories, EU imports from the world minus China dropped by 13 per cent in value and 11 per cent in volume, with a two per cent drop in unit prices.Significantly, China''s share in those products in value terms rose from 25 per cent in 2001 to 38 per cent in the first half of 2003. In the same period, volumes rose from less than 14 per cent to 37 per cent.