The fierce competition in the global textiles and clothing (T&C) market unleashed by the expiry of the World Trade Organization’s (WTO) Agreement on Textiles and Clothing (ATC) on 31 December 2004 has adversely affected Nepal’s ready-made garment (RMG) industry, which ranks among the two top export products of the country. While Nepal’s RMG exports started declining after 2001 due to the combined effects of domestic conflict, the adverse international climate following the 9/11 attacks and the global abolition of T&C quotas covering major Nepalese RMG exports, the ATC expiry almost sounded the death knell for the country’s RMG industry. RMG export earnings declined by a compound annual rate of 14.2 per cent between 2000 and 2007, and by 21.2 per cent from 2005 to 2007. In the United States of America market, earnings declined by 18.5 per cent and 28.4 per cent, respectively, during the two periods.