KARACHI, Sept 7: Exporters fear outbreak of a price war ahead of the quota-free era beginning January 1, 2005, which could invite immediate safeguard measures from importing countries of the West.

"If the government does not frame a policy to regulate prices, suggesting minimum export price for all textile products it could lead to a price war amongst the exporters, giving the possibility of safeguard actions by the US and the European Union in 2005," asserted leading exporters of garments.

Whereas buyers will put pressure to share the quota costs, which are being eliminated by the end of the year, the exporters in order to maintain their market share or even have more excess to the free-market would be more than willing to oblige, the exporters said.

However, this will lead to a price war. This will not only result in cut-throat competition, causing many closures or even bankruptcies, but would also provide a gap to the cheap quality producer to enter the world market.

"Despite the fact that price pressure is not new, however, with the advent of the quota-free market its implications altogether are different and could have far reaching consequences on suppliers of textile goods, exporter and former Pakistan Bed wear Exporters Association chairman told Dawn.

Looking at the emerging scenario, the exporters are desperate and feel that the government should immediately take necessary measures to avoid any debacle if the situation goes unchecked and unbridled.

Many countries have already started working on these lines to save their world market share in the post-quota regime. Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) Chairman Tahir Aziz told Dawn the quota-free era would mean that an exporter would have to compete from within the country as well as with suppliers from other countries.

"It will be most difficult era for an exporter who will be facing tough competition as the economies of scale for the free-market will also change and only those exporters will survive who have better technology and are efficient in their production," he added.

The exporters say that other irritants and challenges such as dealing with a large number of government departments collecting levies and other taxes onaccount of labour welfare, old-age benefit, etc., are yet to be resolved by the government.

"We are hardly left with time to work on product development or quality control as these departments continue to irritate and waste time of the exporters," lamented Pakistan Hosiery Manufacturers Association (PHMA) Chairman Imran Ali Sabir.

Another challenge the exporters are going to confront is the falling cotton prices, which are adding to deflation pressure. But rising prices of man-made fibre like polyester and surging POL prices, resulting in higher transportation cost and wages, are throwing new challenges to the exporters at a time when it is more likely that internal and external factors will be out of their control.

Confronted with such an alarming trend, the exporters have demanded of the government to establish minimum export prices of all range of textile products. "This will help the country from losing the market and save the industry from unhealthy and damaging competition within the country.

In case the government fails to work out such mechanism there is a possibility that importing countries could take advantage of the fall in prices and activate safeguards, which may even include anti-dumping duties, embargoes, etc.