The global textile trading regime is going to change drastically from the year 2005 with the phase-out of the MFA. Its implication on competition will be significant. Countries that have already put competition policies in place and firms that have been improving their capabilities are the ones that are going to face domestically and abroad in a few years from now. We point towards some of the characteristics of competitive firms that will emerge in the ensuing period. The paper presents a summary of comparisons of Indian primary textile firms with those of China and Canada (based on a primary plant level survey in the three countries). In addition, we discuss some processes that are helping the Chinese textile industry grow rapidly. We argue that competitiveness of Indian firms would be contingent on developing long term distinctive capabilities. We also present three key strategies, namely Commitment, Coordination & Cooperation, for developing distinctive capabilities and provide illustrations of initiatives at the firm level, industry level & and the government level that would form part of the implementation package for each strategy.