*only an assistant ESL teacher
I think that use of cotton knit is ok, but I think a person who works with fabric and clothes-making could answer better. You could say "cotton garments" or "cotton shirts" or "cotton sweaters", whichever is appropriate.
I think you should end the sentence with, "then they would color the clothes." The way you wrote it, it could mean that they used bark and thread to color the clothes.