Limits imposed on Chinese and European Union exporters by the World Trade Organisation’s 1974 multi- fibre agreement have been slowly phased out in recent years and were finally removed last month.
Peter Mandelson, the EU trade commissioner, has assured China that Europe will not impose its own quotas to replace them.
The new price cuts follow years of discounting in stores. Tesco and Asda offer jeans for £4 and the cheapest jeans in some stores may now fall to £3.
China is Europe’s biggest textile supplier, accounting for 17.5% of all imports in 2003. A recent study of international labour costs showed that a garment costing £10 to make in Britain can be produced for £5.40 in Turkey, £3.30 in Thailand and just £1.70 in China.
Cao Xinyu, vice-president of the China Chamber for the Import and Export of Textiles, has forecast that garment trade worth about
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£100 billion would come to his country in the next few years.
The predicted Europe-wide fall in prices of 20% has been calculated by Walter Wilhelm Associates, a consultancy firm. The high street chain Next, which has a Chinese purchasing operation in Hong Kong, said it had already introduced a strategy to cut prices by 5% a year.
New Look, another retailer, set up a base in China last year to deal directly with manufacturers in anticipation of the changes. Tom Singh, its founder and commercial director, said it would increase Chinese imports to 40% of stock. Bagir UK, based in Skelmersdale, Lancashire, has built a factory in China to supply Marks & Spencer.
But bargains for consumers may mean job losses in Asian countries hit by the tsunami.
Lorna Hall, features editor at Drapers, the clothing industry’s journal, said: “It is going to get tough. People will break cover on price. Everybody is waiting to see what the big operators like Philip Green, M&S, Next, Asda and Tesco do.”