I. Introduction

1. Objectives of the Study

The textile and garment industry is one sector where developing countries have successfully competed with industrial countries. Over the past decade, the rapid increase in the production capacities of ASEAN countries has placed the region in the same league as the major producers and exporters of the industry. The industry plays an important role in the economies of the ASEAN members, except possibly for Singapore. Undeniably, textiles offer vast potentials for improving the capacity of each country to earn foreign exchange. However, the rapid expansion of trade has been held back by the growing protectionism of industrialized countries, such that textiles is now probably the most regulated item in international trade.

While the issue of protectionism has caused much concern, many foresee that the ASEAN textile industry will be affected by another development. This is China's recent emergence as a major exporter of textiles and clothing. Although the world's largest, the Chinese textile industry has remained inward-looking for many years. More active involvement by China in world trade, particularly in textiles, is viewed as a threat by many producers in the ASEAN region.

This paper attempts to analyze the impact of this recent development on the ASEAN textile industry and on ASEAN-China economic relations. The specific objectives of this paper are as follows:

1. To analyze the structure of the industry and the pattern of its development in the ASEAN region;

2. To identify the problems of the industry and to assess possibilities for the future; and

3. To evaluate the impact of China's emergence as a major exporter of textiles on the ASEAN textile industry and on ASEAN-China economic relations.

2. Scope and Limitations

The textile industry, as referred to in this study, comprises two separate industries: textiles (namely fibres, yarns, fabrics, and other products such as thread, twine, net, and cordage) and garments (namely wearing apparel and accessories).