Tolls on the silk road: local apparel industry cheers China quotas.

Whether they oppose or support stringent quotas, members of the local apparel and retail industries agree on this much: the latest deal between the United States and China to limit clothing and textile imports is an improvement on the current system.

The new three-year deal, set to go into effect on Jan. 1, will curb the influx of Chinese goods on 34 textile and clothing categories from sweaters to wool suits to swimwear. Imports in most categories would only be allowed to grow between 10 percent and 12.5 percent in 2006 and 2007, and between 15 percent and 16 percent in 2008.

"Up until this agreement has taken place, there have been all sorts of safeguards and legal challenges and questions about how many goods can come in," said Paul Charron, chief executive of Liz Claiborne Inc., which owns several local apparel brands, including Juicy Couture and Laundry by Shelli Segal. "That appears to be in the process of being answered."

Under the current system, a series of annual safeguards were imposed on several apparel categories after the U.S. government deemed that a surge of Chinese goods harmed the domestic market. Imports on categories such as socks, undergarments and bras were restricted to increases of 7.5 percent above the previous year's levels.

The limits were legal under the agreement that allowed China to enter the World Trade Organization and were pushed by Southern textile companies after the U.S. market was flooded by cheap Chinese textiles.

But in the first half of this year, imports of certain apparel and textile products skyrocketed by as much as 10-fold, and the total amount of apparel and textile imports was estimated at $20.6 billion in the 12 months that ended in August.

Apparel makers and retailers faulted the system for being disruptive because of uncertainty as to when safeguards would be imposed, how they would be implemented and which categories would be covered. Businesses were also unable to plan for long-term growth because the U.S. government's policy toward Chinese imports wasn't decided.

"A relative level of stability is really important, versus the perceived volatility of the prior year where political reaction can drive short-term decisions," said Larry Meyer, chief financial officer of Los Angeles-based retailer Forever 21 Inc.

J. Craig Shearman, vice president of government affairs at the National Retail Federation, said retailers would often place orders on the assumption that the amount of allowable goods would be at a certain level, but later didn't receive the orders because that amount changed. He said shipments could take as long as six months while retailers waited for quantifies to be worked out.

"It is impossible to deliver to the buyer. It is very difficult for the manufacturer when we don't know what was going on," said Dean Vuong, vice president of Commerce-based K.V. Collections Inc., which sells tops to retailers such as Sport Chalet Inc. "There are many orders that we had to turn down."

Globally, many expect that apparel companies will shift to imports from quota-free countries such as Bangladesh, Pakistan and India, which stand to benefit from the trade agreement.

To compete with China, Laura Jones, executive director of the U.S. Association of Importers of Textiles and Apparel, said that these countries have built up cheap labor pools and a vertically-integrated apparel industry.

However, Jones said that even if other countries can fill U.S. orders, China will still be a magnet. That's because Chinese factories have been able to increase efficiencies, shortening delivery time, and are known for producing high-quality goods. "The decision to buy is dependent on a host of factors: quality, speed of delivery, original designs," said Meyer.

Forever 21, for example, known for replenishing stores with trendy fashions quicker than traditional retailers, gets its clothes from a mix of local and foreign manufacturers.

What's harder to predict will be the trade agreements impact on consumers. Some estimates suggest that retail prices are 12 percent higher than they would be without quotas.

But Cindy Messing, a merchandiser at Los Angeles-based Cee Sportswear, a private-label apparel manufacturer that sells to Sears Holdings Corp. and J.C. Penney Co. Inc., said it's the importer who has been squeezed.

She said Cee's gross profit margins have shrunk 2 percent to 5 percent as a result of the quotas, while retail prices have stayed the same. "Consumers are still demanding lower prices, and the retailers are demanding lower prices from us," said Messing.