With China hamstrung by temporary quota restrictions for another year or two and expected to be less competitive afterwards, and the EU and US likely to be more protectionist against China than they were in early 2005, what does this mean for other apparel producing nations? Mike Flanagan takes a look.

The abolition of quotas at the end of 2004 affected different apparel producing countries in different ways.

A couple of weeks ago I argued that China's changes in its laws and trading policies will make it less competitive to buy basic apparel from once the EU's temporary quotas are withdrawn at the end of 2007 and America's at the end of 2008 (ANALYSIS: Will China's new plan end cheap clothing?).

Since I wrote that article, the Chinese Yuan has continued to appreciate against the dollar and euro, and Clothesource PriceTrak shows clothing exports from China to the main buyer countries are now running around 30% more expensive than those from Bangladesh.

Most importantly, it has become screamingly clear that with domestic sales growing so fast and profitably, China will come nowhere near using up all its 2007 quota for apparel sales to the EU or US.

I also argued that in the EU and US both short-term political changes and longer-term changes in general public sentiment are making trade legislation more unpredictable and, generally, more protectionist - at least against China and Vietnam.

This isn't at present translating into greater protectionism against other countries. Indeed, since no European or American protectionist measure has moved a single apparel order back home, the current protectionist spate is just about the best thing businesses in Bangladesh or Cambodia could have hoped for

So, with China hamstrung for a year or two, and likely to be less competitive afterwards, and the EU and US likely to be more protectionist against China than they were in early 2005, what does this mean for the other apparel producing nations?

Country to country variations
Of course the answer varies a lot from country to country. Because some producer countries have responded a lot better than others to the lifeline thrown to them by American and European protectionists.

At first sight, for example, it's hard to see that India has progressed a great deal since 2004. Its apparel share seemed to soar in 2005 - but deeper analysis shows this was the result of the year's fashion for highly embroidered women's tops and bottoms.

In skirts, for example, India's world share leapt from 8% to 15.7% in 2005 - but by Q3 of 2006 had fallen back to 9.3%. Overall, India's share of world apparel imports, as measured by Clothesource TradeTrak, rose from 3.7% in 2004 to 4.5% in 2006. But it had fallen back to 4% by Q3 2006 - still behind Turkey and Bangladesh.

It's not just fashion that hasn't gone India's way. Like most producer countries, India's growth has come largely from local manufacturers investing in more capacity. But, for a country of India's size and aspirations, there's been surprisingly little such investment.

Well, maybe not surprisingly: India's textile companies are just as interested in investing in other industries, in domestic apparel retailing, in buying cheap central Asian spinning or weaving businesses or in acquiring overseas marketing operations.

So building up extra apparel making capacity to compete with other countries in the tight-margin apparel industry isn't always the most remunerative option investment review committees have before them.

Meanwhile, India's government hasn't made any serious progress in loosening the country's restrictive labour laws, solving the problems of costly and too often interrupted energy supplies, or tackling the high import duties on man-made fibres and fabrics that destroy the country's competitiveness on anything that's not made from cotton or silk.

Oddly, India's declining share of the apparel market roughly coincides with an extraordinary growth in the number and scale of western companies' buying offices in India.

In apparel, India has lost share especially to its near neighbours, and Delhi, Mumbai or Bangalore are pretty well the only places it makes sense to locate a buying office to serve all of the subcontinent.

And for many retailers, the real growth in Indian interest lies in putting more corporate back office processing there, and in reviewing how to set up retail operations.

What about India's neighbours?
What's most interesting about Bangladesh is what hasn't happened:

Contrary to the gloom-mongers before quotas were abolished, Bangladesh hasn't seen its apparel industry collapse. From 6.5% in 2004, its share has grown to 7.3%, and it is now the world's second largest apparel exporter, by number of pieces.

Nor, in spite of the spate of violence throughout 2006, has the country fallen apart. However aggressively activists attack factories, or bring business to a halt through transport and power strikes, the resourcefulness of the Bangladeshi apparel industry keeps getting garments out, more or less to time and budget.

But, sadly, the dreadful level of wages throughout the industry hasn't changed much either. The country's minimum wage of $14 a month has remained unchanged since 1994.

In October, the government agreed to increase this to $25 - but the dismal truth is that the country's extraordinary resilience has been founded above all on its very low prices - themselves attributable its very low wages.

Meanwhile, port congestion remains, sea freight is slow and expensive, Customs are tortuous and notoriously corrupt, and power is constantly being turned off.

But there are growing signs buyers' patience is being stretched thin.

Trade data seems to imply Indonesia's share of the apparel industry has grown sharply since quota abolition, and especially so since quotas were temporarily reimposed on China.

But many Indonesians worry that this apparently healthy trend might be the result of illegal transhipments of Chinese imports - which have almost quadrupled over the past five years.

What's not happened in Indonesia though has been any substantial expansion or upgrading of clothes making capacity, with a recent just-style article claiming that almost no investment has gone into the industry this century.

And that's not just accidental. Indonesia's Central Bank has actually issued legally binding guidelines to banks, telling them to restrict lending to so-called "sunset industries" - in which it includes clothing and textiles.

Now clothes making might well be a dying industry in South Carolina or Nottinghamshire. But it certainly isn't in Indonesia. That's obvious to anyone going more than a few yards from Bank Indonesia's ivory tower - and even the country's real banks have been led to protest against such nonsense, with the president of Perbanas, the Association of Indonesian National Banks, publicly rebuking Bank Indonesia.

In Indonesia, India and Bangladesh we're still seeing producer country governments failing to ensure the apparel industry has the basic support - like reliable energy and transport, access to competitively priced raw materials, or banks offering affordable finance to viable businesses.

These three governments are by no means unique - but when Western producers complain about their own difficulties, it's worth remembering how tough an environment their emerging market competitors have to deal with.

But that's not the only picture
Lesotho
's performance since quota abolition has been extraordinary. Like all African producers, its apparel exports fell sharply in 2005: 35% down on 2004, with savage job cuts in a country with few alternative job opportunities.

But - unlike any other African country - apparel exports rebounded sharply in 2006: up 28% by September, and almost back to 2004 levels.

Explanations vary. It helps that Lesotho's currency has devalued heavily against the dollar and euro - one of the very few producer country currencies to have done so.

Gap, in particular, promised to source from the country as much as possible to limit further damage, and several other retailers did likewise. There has also been interest in Lesotho among celebrity activists: Bono's Product Red line, and the buzz around the Edun factory, don't hurt.

But there's a further explanation. "We've been astounded at what has happened in Lesotho," says Leanne Sedowski of the University of KwaZulu-Natal, a researcher in local clothing and textile industries.

She claims the country's trade minister Mpho 'Melie Mali involves himself personally with manufacturers' problems. "If a container gets delayed at the border post, they phone him," She is quoted as saying.

All a far cry from the superficiality of the now-deposed government in Thailand, and its now largely abandoned Bangkok Fashion City project.

This seems to have assumed, to quote a local paper, that spending over $50m on educating local talent to become "front-rank designers could somehow transform Bangkok from its lowly status as a garment manufacturing centre, known more for cheap labour than world-beating designs, into another Milan, Paris or New York."

Five countries, with five very different recent histories of government involvement in our industry. None behaving as predicted since quotas were abolished. And there are another 190 different pictures in the other 190 countries exporting clothes to the affluent world.

Meanwhile, of course, the tens of thousands of apparel exporting companies have developed in still different ways. It's how they've changed that really sets the scene for 2008 and after. And that's the next thing we'll be looking at.

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.