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The confrontation in the Persian Gulf is having an effect on the fashion industry.

The most immediate effect has been to chill consumer confidence and slow early fall sales, New York retailers say. But in Europe, the costs could be higher.Customers have already canceled orders for the Paris haute couture, which depends on rich Arabs for its business.

Some houses such as Jean-Louis Scherrer and Guy Laroche, which sell up to 30 percent of their clothes to Arab clients, have lost a small number of orders from Kuwait and Saudi Arabia, Women's Wear Daily reported last week.

Men's fashion executives back from trips to England in August said some of the largest and finest British fabric mills, which export substantial amounts to the Middle East, were suddenly in an awkward position.

As Middle Eastern businessmen have exchanged their robes for Western business attire, only the very thin, luxurious wools are made into suits for the desert climate. Kuwait is the largest consumer of fine English worsteds in the Middle East.

The mills were just about to deliver their fall orders, to be turned into clothing by tailors in Kuwait and other nations, when Iraq made its move. Now the mills are stuck with hundreds of thousands of pounds of fabric.

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