Leave the Document Size as is, and zoom out to see the entire document on the screen (e.g. press the Shift key and then the 3 on the keyboard to zoom out to one-third size).
Using the Select tool, select the upper left corner stitch of the document (zoom in if necessary).
Choose a color in your palette that you would like as the background color of the garment.
Choose Paste Special to bring the graphic in. You will see a marquee surrounding the image (which may be larger than the document itself).
While the Marquee is still active, choose the File/Size from Selection menu to crop/expand the image.
Double-click on the Select tool to Select All.
Use the Paste Special function to import again, this time filling in the complete garment.