We're about to enter the most interesting phase of the post-quota world says Mike Flanagan: the period of global information chaos.

The basic facts are simple. In 2004, slightly less than half the world's population lived in India and China. Yet, because of quota restrictions, their workers supplied only 23 per cent of the EU's imports of clothing, and only 12 per cent of America's.

All things being equal, we'd expect to find India and China advancing over the next few years to capture about 45-50 per cent of rich countries' apparel imports. Much less, and there's probably something wrong. Much more, and it'll be because one or other of them has developed exceptional efficiency in making clothes - though no doubt many will claim it's been done by some kind of dirty tricks.

If, between them, they get to 45-50 per cent, they will have created job opportunities for some of the poorest people on the planet. And they'll have trebled their sales to the US and EU.

Now it's pretty certain we're going to see Chinese and Indian sales grow very sharply over the next few months. And every scrap of information about that growth will be followed by cries of woe, as every vested interest in the planet predicts the imminent destruction of the world's industry.

So here's a short guide to some of the questions you should be asking when you hear these cries.

1: It's the competition, stupid
Clothing prices are going to fall.

In 2002, the last time some quotas came off, Chinese manufacturers cut prices in the affected categories by 50 per cent and more within the first few months. So even though manufacturers in most other countries cut their prices as much as possible, after six months only Bangladesh matched China in the relevant categories (bras in the US, anoraks in the EU).

It wasn't the scale of China's price cuts that mattered; it was the level they cut them to. And last time quotas went, China got cheaper than its competitors in the newly-liberated categories.

What's happening now? Well, the EU's product licensing system now tracks China's prices. And by 18 February 2005, prices for newly quota-free apparel categories from China were running 21 per cent lower than in 2004 - and in some categories, like dresses, those cuts were as high as 54 per cent.

Expect to see some "Prices cut by 54 per cent" stories quite soon. But how do they affect China's competitive strengths?

China was always a relatively expensive place to buy clothes from. For instance, in autumn 2004, T-shirts arriving in the EU from China were 168 per cent more expensive than from Bangladesh, which had no quota limit and wasn't subject to import duty.

Chinese T-shirts for shipping to Europe are now 35 per cent cheaper than they were a year ago. But that still makes them twice the price of T-shirts from Bangladesh. And China's still being undercut by other countries in suits, coats, trousers, underwear, dresses, blouses, shirts, sweaters, socks - every apparel category except formal men's jackets.

And not just by Bangladesh. Depending on the garments, you can find better value than China in Sri Lanka, India, Malaysia and Egypt. In fact virtually every country in the world undercuts China on something. Even EU neighbours like Romania, Turkey and Morocco.

Indeed socks from EU member Poland are now half the price of Chinese socks, and Chinese men's shirts are 27 per cent dearer than shirts from EU member Latvia.

China's inevitable price cuts are important. Obviously they will increase China's share of garments sold. And, if they provoke matching price cuts elsewhere in the world, they may well tip many manufacturers - especially in the world's poorest countries - into unprofitability.

But, on the evidence so far, Chinese manufacturers haven't yet overcome their long-standing price disadvantage against many other producing countries. They may well cut their prices more. But there's little evidence of it…yet.

2: What's the comparison?
According to official figures, Hong Kong and Macao (combined population: about the same as any one medium-sized Chinese city) exported around half as many clothes to the US in 2004 as mainland China (population: about 150 times Hong Kong and Macao).

Even the dogs in the street are pretty clear that virtually every stitch of those 'Hong Kong' and 'Macau' clothes were assembled over the border. Now quotas are off, there's less incentive for all this creative labelling. So simply being honest about where clothes are made will inflate America's import data from China by 40 per cent.

Spurious labelling wasn't confined to Hong Kong, and it wasn't just practised by back-street traders. Major, legitimate, traders are openly boasting of how their profits will be boosted now they don't have to go to the bother of sending clothes to a third country to get quota.

And it's been going on virtually everywhere. Speaking this month, Botswana politician Molefe Molatlhegi attacked the country's ruling party for "turning a blind eye" to T-shirts being imported from Asia into his country, having a "Made in Botswana" label attached, then re-exported to the US to take account of Botswana's quota and duty concessions.

As lobbyists tell us of smaller countries losing exports, we can be sure of one thing. None of them will ever tell us how many of those exports were of goods made on the other side of the world.

3: What are they telling me?
Official trading data takes several months to be published. Even at the end of February, China is still a month from publishing its first full export data even for January 2005. And other major apparel exporters, like India, Indonesia and the Philippines have published their detailed export data only for September 2004.

Many of those headline stories that often appear on the Web - "Textiles exports down 80 per cent, says Molvania trade association" - turn out to be flawed, early releases of their internal data - and turn out a few months later to be much less dramatic stories.

At present, China's Customs authority has released the fact that textiles and apparel exports in January were up 14 per cent in dollar terms year-on-year (bizarrely, a growth rate that's down on 2004), and Turkey's trade association claims its apparel/textile exports were down10 per cent in January compared with the same month in 2004. But there are no details from either source.

Warnings of import surges
So let's go back to the EU's import licensing scheme. To get early warning of possible import surges, it tracks licence applications for EU apparel/textile imports from China. But we've no idea whether those licences are going to be used this week, next week or some time in the future.

In fact, we've really got no idea whether the licences are ever going to be used. It costs nothing to get them, and every importer in Europe is aware there's a possibility the EU might re-impose temporary quotas if things get out of hand. It would be pretty surprising if one or two importers didn't acquire licences just to have handy if quotas come back (or even to sell to someone else if there were a few euros to be made).

But in some cases, importers seem to be applying for licences at quite a lick. By 18 February, for example, they'd applied to import 18 per cent more T-shirts than they imported in all of 2004, and 36 per cent more dresses. But even if they end the year doubling their imports of Chinese T-shirts or dresses, China would only account for about 10 per cent of Europe's T-shirt imports or 35 per cent of dresses.

That's a lot of manufacture moving from other poor countries (and might even cause one or two job losses in the EU, though don't bet on it). But it's a long, long way from the total destruction of the world's apparel industry

The first casualty of war, they say, is truth. That's how the phrase "the fog of war" got invented: in the heat of battle, finding out what's really happening is tough. The principle applies to trade wars just as much as to the more conventional sort.

Mistrust all assertions you hear about what's happening right now. With the exception of those coming from a source that modesty prevents me from revealing

Mike Flanagan is chief executive of Clothesource Sourcing Intelligence, a UK-based consultancy that provides the western apparel buying community with objective information on apparel production, trade, price competitiveness, and apparel producers in over 100 countries.