context: i'm an economics phd student.
if you've taken an intro economics class, i'm fairly confident that you will be taught that under certain assumptions (the "frictionless benchmark", just like the one in newtonian physics), the market is efficient, i.e. it manages to achieve the most optimal outcome (put another way, if you were Almighty Lord Dictator and you got to choose who got what and who did what, you wouldn't be able to do any better than the market). this result is the first welfare theorem. it's a fairly simple yet loaded idea because in the past it's been used as justification for laissez-faire policy, i.e. real unflinching adherence to literal capitalism. however, it is now fairly widely accepted that the assumptions needed for this result to actually be true don't hold in the real world, so you're left trying to pinpoint a) which assumptions fail and how, and b) the best policy to deal with it.
in regards to a), without any guidance or structure, you could theoretically tell any story, as long as you choose the right assumptions that end up making your story true. in reality, there are a whole lot of gaps between the real world and the "frictionless benchmark", and it's a mess trying to determine the relative importance of each of the frictions and how they interact with each other. in the end, while "research economists" may use intuition and theory to formulate a plausible story, they will need to use data to measure the magnitudes of these frictions. as for b), policies themselves create new frictions, so the course of action after having determined a) is not usually straightforward either.
that preamble was just to say that the below is a list of what i think are reasonable guesses for a), but i can't be sure because i haven't seen any real data. won't say anything about b).
the first real friction i see is that companies need start-up capital and must pay other fixed costs (like to rent a store or build a website). this overhead prevents everyone from entering the textile industry. if that were not the case, i.e. the industry were competitive, then it might be ok that there are lots of cheap/free donated clothes, since the locals with good fashion designs, or clever ideas for producing clothing efficiently, would be able to coexist with the cheap/free donated clothes through their ability to offer something new and innovative to the local consumers. however, if it isn't free to start up a business, some smaller-scale potential operations wouldn't be able to cover their overhead because of the competition from the donated clothing, and would have to exit the industry (or never enter to begin with). that of course will result in less activity (e.g. fewer jobs) in the local textile industry.
another friction is that clothing is not a perfectly competitive industry, i.e. each supplier has some market power. a monopoly is an extreme version of market power, but as long as a firm is selling something for which you can't get a perfectly identical item from somewhere else, it has market power. a distributor of these donated clothes has market power, and its presence will prevent some local businesses from surviving.
taken together, i think it's not crazy to assume that it probably has a negative impact on the local textile industry. honestly i can't really tell a compelling story about why donated clothing may be good for the local garment industry, besides the fact that locals may have access to cheap donated clothing, and so they can spend resources elsewhere (paying for education, opening a business, etc), but since i don't really think clothing makes up a big chunk of people's expenditure, it probably won't generate huge savings or have a sizable positive impact for the local clothing industry.
however, that's just focusing on the local garment industry. in the end, we care about the welfare/quality of life of the locals, not their textile industry. a big/successful textile industry may be one way to improve the quality of life of the locals (by creating jobs, small businesses, etc), but it is not the only way. for example, you could also argue that cheap clothing is cheap clothing, which is good for local consumers! they can put their savings towards other uses like above. it is not necessarily the case that every country should have a textile industry -- if they already have other big, developed industries, having donated clothing frees up people's time to work in those other big, developed industries. it's like they can choose a few branches of the tech tree and really build those up, instead of having to waste tech points on each branch to cover the basics. this argument is similar to the argument for international trade -- e.g. Canada can focus on making maple syrup because it's getting avocados from Mexico and similarly for Mexico; if they couldn't trade, Canada would have to have some people making avocados (which grow worse in Canada) instead of maple syrup, or not have avocados at all. effectively, trade allows you to "borrow" the industrial productivity of your trading partners (e.g. Mexico's climate and local knowledge of avocado farming) and in return you lend them yours (Canada's climate for maple trees). you are not constrained to having only what you can produce yourselves. however, this argument in favour of cheap donated clothing relies on easy transfer of people between the textile industry and other industries. otherwise, workers who want to work or are trained to work in textiles may suffer because of job loss. if there are lots of these people, the results can be devastating (see: U.S manufacturing workers suffering from Chinese import competition, something that brought up a lot in the last presidential race). in the end, while i can't conclude for sure that donated clothes are good for welfare, it's safer to say that it will cause inequality in welfare. that's a whole other issue.
in terms of the ethical judgement, it is not only the locals of the destination country we care about. their standard of living will surely be taken into consideration, as well as inequality among them, but maybe you also care about the environment -- and then you would have to consider that shipping used clothing to another country may be less environmentally impactful than having that country expand its own textile industry (and make brand new clothing). (but maybe it isn't.) and then you would have to personally decide whether you care more about the impact to the quality of life of locals, to the inequality in the country, or to the environment. economics can't decide that one for you (:
i hope that wasn't too confusing -- i tried to stay succinct and simple, there was just a lot to say. definitely happy to clarify or answer questions.
