Ethiopian indu strial development policy has put the textile and appa rel ind ustry on thernforefront position to acce lerate the country's indu stri ali zation process. The avail abili ty ofrnhuge labour fo rce, the utili zation of abundant raw material , the growin g demand of thisrnindustry's product (as the bas ic human need) and the intern ational goodwill to prov idernprefe rent ia l and differential market access to this industry help the sector to pl ay arnsignificant ro le on the development of the co untry's economy and on miti gation ofrnpoverty. This paper examines the economic impact of texti le and apparel in dustry, thernutili zation of preferential and differential market access and the determinants of thernexport performance.rnThe desc riptive anal ys is covers the period 1999 to 2009. The result of the descript ivernanalys is reveals that the economic impact and the preferenti al market utili zation of therntextil e and apparel indu stry are very limited. The time seri es econometri c analysisrncovering the period 197 1172 to 2008109 employed Eviews 5 (a computer program as arntool for econometric analys is). The econometri c analys is result shows that labour costrnand trade openn ess (liberali zat ion) have pos itive impact on the export performance of thernsector, whereas cotton export and exchange rate have negative impact.rnAs this study tries to indi cate, the governm ent supports onl y those who engagernthemselves on export market. However, this is not sati sfactory and success ful for thernsector's development. So one of the major conclu sions of this study is that unl ess therngo vernment rev ises its poli cy direction towards developing and supporting the sectorrn(boost the sector in vestments), th e current "a rtifi cial" export growth of the indu stry willrnbe short-li ved and ult imately results in unsustainable export growth.