The Kenyan textile sector could begin to experience a slow-motion disaster starting January 1, or, then again, it may suffer only moderate damage.

Either way, the New Year promises nothing positive for an industry that has been briskly expanding under the impetus of the US Africa Growth and Opportunity Act (Agoa). Agoa has been responsible for the creation of an estimated 30,000 jobs in Kenya during the past three years. And now many of these workers are facing an uncertain future.

The Agoa initiative, launched in 2000, allows duty-free entry to the United States for most exports from Kenya and 35 other sub-Saharan countries.

Agoa has been of greatest benefit to the half-dozen African countries that manufacture significant amounts of clothing for export. Kenya, for example, has seen the value of its duty-free sales to the United States - consisting mainly of trousers and knit shirts - climb from $129 million in 2002, to $184 million in 2003, and to a projected $250 million for the current year.

That trend may well be thrown into reverse in 2005, however, due to the imminent end of the international quota system for textiles and clothing.

The Multi-Fibre Agreement, in place for the past 40 years, has allowed importing countries to impose limits on the volume of textiles and apparel that can be bought from a given country. The quota system spurred the globalisation of the textile industry because importers in developed countries were forced to build a multinational network of suppliers.

Quotas have, in fact, been of greater benefit to African textile exporters than have the duty-free advantages offered through Agoa, says Paul Ryberg, director of the Washington-based Africa Coalition for Trade.

"The experience under Agoa has confirmed that quotas - not tariffs - have been the driving force in determining where US importers source their textiles and apparel," Mr Ryberg says.

"Tariffs are of course relevant, but quotas are much more compelling."

Thus, he adds, the end of the quota system could have a "profound impact" on Kenya's growing textile sector.

At the very least, Mr Ryberg predicts, less efficient Kenyan companies and those making types of clothing that China also produces are likely to be forced out of business in the next couple of years. In addition, there is little possibility of new clothing-export companies emerging in Kenya, he says.

Christian Aid, a UK-based charity, also foresees dire consequences for Kenya as China and other leading Asian producers are freed from limitations on their clothing sales to the US and European Union countries.

In a new study entitled Rags to Riches to Rags, Christian Aid says that "while Agoa will continue to confer some measure of protection, the ending of the Multi-Fibre Agreement is likely to damage severely Kenya's nascent garment sector." The industry is likely to suffer "significant job losses," the study warns.

The other major African clothing exporters - Lesotho, Mauritius, Madagascar and South Africa - will also be hard hit, according to this assessment. The end of quotas "will have devastating consequences for some of the world's poorest countries and for millions of the world's most vulnerable workers; "most of them women," Christian Aid maintains.

From New Year's Day 2005, "only one new rule will then apply: survival of the fittest."

But in the view of Stephen Lande, another US expert on Agoa, those predictions are far too pessimistic.

Agoa's duty-free provisions do give Kenya an important advantage over Asian clothing exporters, argues Mr Lande, president of Manchester Trade Ltd, a Washington consulting firm.

The same point is being made by US Trade Representative Robert Zoellick. During a recent visit to Lesotho, Mr Zoellick told clothing exporters, "You pay zero tariffs where the other countries that are not part of that system pay tariffs ranging from 10-12 to 15-20 per cent."

While China's integrated production operations are highly efficient and thus more cost-competitive, Agoa could enable Kenya to retain its US market share if it also reduces its costs of production, Mr Lande says.

The machinery in the newer Kenyan garment factories is fairly up to date, but what's needed, he adds, is "better systems engineering." By this, Mr Lande means more effective training of Kenyan managers, machine operators and technicians. "All this is do-able," he says.

"Kenya needs to roll up its sleeves," Mr Lande declares. "Agoa was a miracle, and now it's being challenged. The response should not be to say this is a problem with no solution."

To be truly competitive in the newly liberalised trading order, however, Kenya will have to develop the same "one-stop shops" that China has built, according to most analysts. In these integrated garment factories, raw cotton is spun into yarn and fabrics are then dyed, cut and sewn. These are the sources of the shirts, trousers and dresses that China will soon be able to sell in much greater quantities to importers in the US and Europe.

Kenya is not close to such a breakthrough, however. Its feeble cotton-growing sector, for example, cannot even meet domestic demand, let alone supply the export sector.

As is also the case in the other Agoa countries, most garments made in Kenya are produced from fabrics purchased from non-African sources. Under an amendment to Agoa approved by the US Congress earlier this year, beneficiary countries in Africa are able to continue using these "third-country fabrics" through 2007.

American textile trade unions probably would not try to block such action in Congress, Mr Lande adds, even though the Agoa countries are sometimes viewed as potential threats to the jobs of US garment workers. "The unions won't object," he says, "because the Agoa countries are their biggest allies inside the World Trade Organisation in the effort to put controls on China's exports."

China itself is aware that any flash-flooding of US markets by its clothing exports will trigger moves to reimpose quotas. The Americans and Europeans are able to set temporary quotas - referred to as "safeguards" - under the terms of China's accession to the World Trade Organisation (WTO).

For this reason, Chinese officials announced last week that they will levy tariffs of unspecified amounts and durations on their clothing exports to the US and Europe. The aim is to quell concerns in importing nations that low-cost Chinese exports will destroy domestic garment and textile industries.

But this Chinese initiative is probably only a ploy, Mr Ryberg says.

"Even if the export tariffs have some bite, they will almost certainly be of temporary duration, "a transition mechanism," Mr Ryberg says. "I would expect US buyers would view the tariffs as a temporary inconvenience that they are willing to endure to establish the sourcing relationships they want to have with Chinese manufacturers."

Some analysts have meanwhile suggested that China's growing political and economic interests in Africa might lead Beijing to lessen the impact of its export power on Agoa countries. But Mr Ryberg dismisses the possibility that China would act in such a fashion.

"It has become perfectly clear in Geneva (headquarters of the WTO) what China's priorities are," Mr Ryberg says. "There have been repeated efforts in the past two months, led by Africans, to adopt some measures that would ease the effects of the end of quotas. China has vetoed every one of them."