On January 1, all quotas on textiles and clothing exports came to an end, sparking fears that China would flood the market, undercutting competitors in Europe, the United States and crucially, many parts of the developing world.
In the event, however, Asia's textile exporting countries are coping better than first expected and forecasts of a labour and trade catastrophe have not panned out, with several factors limiting the damage.
Among them are the safeguards importing countries can invoke should China's export growth "create serious market disruption", the report said.
Another is the fact that "China is in the process of outgrowing its comparative advantage for the most labour-intensive manufacturing industries, and textile and clothing's share of employment and GDP is on a declining trend.
"It is evolving towards higher value-added industries. China is developing not only as a manufacturing hub but also as an important consumer market which is likely to absorb a much larger share of its own production, as well as total world imports," the report said.
In 2003, China accounted for 20 percent of total world textile exports and 28 percent for clothing.
The report, "Promoting Fair Globalization in Textiles and Clothing in a Post-MFA Environment," has been prepared for a meeting later this month in Geneva on the social and economic impact of the ending of the Multi-Fibre Arrangement (MFA).
In Asia, the countries predicted to be the main beneficiaries of the post-MFA trading environment were those that had suffered most earlier under its restrictions -- Pakistan, India and particularly China, the report said.
Those who had received preferential treatment -- Bangladesh, Cambodia and Sri Lanka -- were predicted to suffer.
While China has reaped benefits, the report cautions that its textile and clothing trade was artificially suppressed at the end of 2004 and artificially inflated in early 2005.
"In the first four months of 2005, Chinese textiles and clothing exports were up 18.4 percent, year-on-year. Exports to the US and the EU rose 70 percent and 45 percent respectively, although some of the increased market share may come from rerouting of exports away from Hong Kong and Taiwan" -- both of which saw export values decline, the report said.
"Bangladesh -- one of the countries most often cited as a potential loser -- has managed to maintain its comparative advantage, despite strong Chinese competition.
"After initially dropping by 52 million dollars in January, orders recovered strongly in February -- up 157 million dollars -- and in some sectors were up as much as 48 percent.
"New jobs are expected to be created. Manufacturers in Bangladesh are also exploring new strategic alliances -- for example with China."
Cambodia also seems to have fared well, in fact better than many other developing economies of its size, the ILO said.
"The volume and value of US exports have increased since January and the strength of the garment industries performance has prompted the (International Monetary Fund) to revise Cambodia's predicted 2005 GDP (gross domestic product) growth to six percent (from 2.3 percent)."
By contrast India -- expected to be a major winner with predictions of up to one million new jobs created by 2010 -- has had mixed results.
Among smaller developing countries, the Philippines, Malaysia and Sri Lanka all suffered a decline in export values, while in Vietnam clothing exports have stagnated and producers are expressing uncertainty in the face of Chinese competition, the report added.
