In anticipation of today's scheduled elimination of global textiles quotas, Chesnutt has acted, though not in the way many would hope. He has closed three plants and laid off nearly half his work force since 2001.

The president of National Spinning in Eastern North Carolina also has spent more than $10 million on robots and other machinery to make his six remaining plants run more efficiently. As a result, National Spinning is much leaner and meaner than it was three years ago.

So why is Chesnutt still worried? The answer, in a word: China.

Today, textile and apparel quotas used since the 1960s to limit access to prosperous markets such as the United States are set to end. From now on, retailers and importers will be allowed to buy as much clothing as they want from lower-cost producers in China, India and a handful of other developing nations.

China -- with its shiny new factories and abundant supply of inexpensive labor -- stands ready to capture a huge chunk of the $77 billion U.S. textiles and apparel market. China makes about 16 percent of clothing sold in the United States, but it could soon take over half of the market, according to an estimate by the World Trade Organization.

The WTO has slowly been doing away with the 40-year-old system for the past decade, though nearly two-thirds of textile and apparel items remained under quota until today.

"This time they're lifting quotas on virtually every item you wear, and China will in all likelihood overwhelm everybody," said Robert DuPree, vice president of the National Council of Textile Organizations, an industry lobbying group. "This is enormous."

Like many of North Carolina's textile and apparel manufacturers, National Spinning has been preparing for the expected onslaught by cutting costs and seeking potentially lucrative niche markets. Chesnutt even bought a company that makes knitting machines in hopes of driving up demand for yarn.

"We're trying, but you have to understand that at the end of the day, this China situation is a big train," said Chesnutt, whose company employs 1,000 in the state.

Seeking help

Indeed, Chesnutt and others also are seeking help from the U.S. government, filing safeguard petitions to limit Chinese imports of several types of pants, fabrics, yarns, shirts, socks and underwear. They say that China's rapid rise as a manufacturing powerhouse could not be envisioned in 1994, when the elimination of quotas was negotiated, and that now more time is needed.

Safeguards limit Chinese imports to 7.5 percent annual growth and expire at the end of the year of their approval, though they may be extended annually through 2008.

But manufacturers were delivered a setback Thursday, when the U.S. Court of International Trade in New York issued an injunction preventing the U.S. government from considering the safeguard petitions. Manufacturers called on the Bush administration to appeal the decision.

China agreed to allow the United States to impose safeguards as part of its entry into the WTO in 2001. And last month, the Chinese government said it would impose tariffs on clothing exports, hoping to appease manufacturers in the United States and Europe.

But safeguards face opposition from U.S. retailers and importers.

Retailers and importers say they've had to spread their production across many countries to stay below quota, which in turn has raised their costs. They say much of the cost reductions from the end of quotas will be passed on to consumers, and they predict declines in clothing prices of as much as 15 percent. But there are no estimates of how soon consumers will see the savings.

Those in favor of lifting the quotas say manufacturers have had plenty of time to get ready for competition with China.

"If you haven't gotten your adjustments done before this week, you pretty much deserve to be out of business," said James F. Smith, an economist at UNC-Chapel Hill.

More job losses

But manufacturers warn that many more workers will lose their jobs if China is allowed unhindered access to the U.S. market. North Carolina has lost 160,900 textile and apparel manufacturing jobs in the past decade, leaving it with a little more than 100,000.

Gary Gereffi, director of the Center on Globalization, Governance and Competitiveness at Duke University, estimates the state's textile mills and apparel factories will shed 35,000 to 50,000 jobs more by the end of 2008.

"We're just not going to be able to out-compete with countries like China and India, where wages are one-tenth of ours and their workers are equally motivated," Gereffi said. "We have to innovate our way out of this."

Performance Fibers did just that. It makes nontraditional textiles for tires and other industrial uses at a 500-worker plant in southeast Chatham County. Quotas on those types of textiles were lifted nearly 10 years ago. Four of its five biggest competitors do virtually all of their production in Asia.

As a result, Performance Fibers charges more for its products, but it also offers faster delivery, innovative features, and flexible service, said Greg Rogowski, president and chief executive. Shipments from Asia take four to five weeks to reach customers in the United States and are still subject to tariffs, leaving some advantage to American producers, Rogowski said.

This year, Performance Fibers plans to add about 50 workers to its Chatham plant.

"There are ways of competing with China. We've been able to do it," Rogowski said. "But you can't do it overnight."

Some of North Carolina's largest manufacturers have prepared for the end of quotas by moving much of their production offshore. VF Corp. of Greensboro, the maker of Lee and Wrangler jeans, has shifted its operations to Asia, Mexico and the Caribbean, though it still employs about 3,400 in the Carolinas.

Others have positioned themselves to take advantage of China's emerging middle class. Sara Lee Branded Apparel, which employs 6,000 in North Carolina, has introduced its Hanes label in China and expects sales to increase rapidly, said Peggy Carter, spokeswoman for the Winston-Salem company.

International Textiles expanded its overseas operations last month, announcing a partnership with a Hong Kong company to build a dyeing and finishing plant for interior fabrics in Hangzhou, China. New York financier Wilbur Ross formed International Textiles last year by combining two Greensboro companies, Burlington Industries and Cone Mills. Ross has said there will be a need for affordable furniture in the country.

And a new report from the Harvard Center for Textile and Apparel Research in Cambridge, Mass., offers hope for North Carolina's smaller manufacturers. It says they can compete in a world without quotas if they keep costs down, shorten their production times and offer more variety.

"It's difficult for retailers to know what's likely to sell three, four, five months in advance," said Fred Abernathy, a Harvard professor and author of the report, referring to the time it takes to receive products from Asia once orders are placed. "There's an enormous advantage to making decisions as late as possible, and I think many manufacturers have not yet fully exploited this."

Steve Dobbins, president of Carolina Mills in Maiden, has closed 10 plants and laid off 1,400 workers in the past four years. He also has taken various steps to avoid toe-to-toe competition with China.

Carolina Mills, with 1,200 employees and seven plants left in the state, now makes thread for medical bandages, American flags sold to the U.S. government, and pricey brands such as Coolmax socks and Polartec fleece. And, yet, Dobbins still worries about his company's long-term viability.

"Up to this point, China has been focused on making large quantities of fairly inexpensive products," Dobbins said. "That means there's opportunity in some specialty things."

"But certainly," he added, "there's no guarantees."

Staff writer Amy Martinez can be reached at 829-4884 or mailto:amartine@newsobserver.com

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