BUSINESS

US Senate leaders upbeat on debt deal

US Senate leaders have expressed optimism after a flurry of negotiations on raising the federal debt ceiling to avert a potentially disastrous default.

They were also nearing a deal to end a partial government shutdown, now in its third week, congressional sources said.

A budget bill would also need to pass the House of Representatives. House Republicans triggered the whole political deadlock two weeks ago.

The US must raise its $16.7tn (£10.5tn) borrowing limit by Thursday.

As he toured a soup kitchen for the poor in Washington DC on Monday, President Barack Obama warned that "defaulting would have a potentially devastating effect on our economy".

He had been due to hold talks at the White House with congressional leaders that afternoon, but the meeting was postponed to allow the parties more time to cobble together an agreement.

'Tremendous progress'

According to US media, the deal currently under discussion would fund the government until 15 January while raising the debt ceiling until early to mid-February.

Senate Democratic Majority Leader Harry Reid told the chamber on Monday evening: "We've made tremendous progress.

"We hope with good fortune... perhaps tomorrow will be a bright day. We're not there yet."

Republican Senate Minority Leader Mitch McConnell also sounded upbeat, hailing "substantial progress".

John Boehner, the Republican leader and Speaker of the House of Representatives, met Senator McConnell, too.

A closed-door session of Republican senators and representatives was set for Tuesday morning.

Democrats appear to have so far fended off Republican attempts to force any major changes to President Obama's signature healthcare law.

Conservative hardliners were initially vocal in demanding that the White House agree to delay or eliminate funding for the Affordable Care Act.

However, Senate Republicans are still reportedly pushing for slight modifications to the law. According to US media, they want stricter measures to verify the incomes of those seeking health insurance subsidies. They also aim to suspend a tax on medical devices.

Even if a deal is reached in the Senate, it is unclear whether Congress could act in time to pass legislation that would avert the 17 October default deadline.

Hardline conservatives such as Texas Republican Ted Cruz could use Senate rules to stonewall a vote.

In the House of Representatives, a deal could meet fierce resistance from the Tea Party-aligned Republicans.

One of those conservative hardliners, Kansas Representative Tim Huelskamp, was quoted by the New York Times as labelling his upper chamber colleagues "the Senate surrender caucus".

"Anybody who would vote for that [Senate deal] in the House as Republican would virtually guarantee a primary challenger," he said.

Republicans have taken the brunt of blame for the latest fiscal cliffhanger to cripple Capitol Hill, according to opinion polls.

A Washington Post/ABC News survey on Monday found 74% of voters were unhappy with congressional Republicans' handling of the standoff, compared with a 53% disapproval rating for President Obama.

Some in the party have voiced concern that the affair could damage its prospects in next year's midterm elections.

Economists and bankers have warned for weeks of dire consequences should Congress fail to reach an agreement on raising the nation's debt ceiling.

The US Treasury has been using what are known as "extraordinary measures" to pay its bills since the nation reached its current debt limit in May.

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Chinese fakes cash in on Dr. Dre's Beats headphones bonanza

Shenzhen, China-- Three weeks ago, hip-hop star Andre Young -- better known as Dr. Dre -- made news as his Beats Electronics line, a maker of premium headphones, was valued at more than $1 billion thanks to an investment from the Carlyle Group.

But the former N.W.A. rapper is not the only one profiting from his headphone line. Across the Pearl River Delta in southern China, counterfeit Beats are flowing out of factories, assembly workshops and shops, attracting businesspeople that sell the headphones on global markets.

A CNN reporter approached wholesale companies about buying in bulk in order to learn how the underground sale of knock-off headphones works. "Business is very good," said a woman, who, with her family, runs a wholesale company selling copied headphones in one of Shenzhen's many mega-malls. "You buy cheap from me, you sell expensive in your home country, we all make a lot of money," she added.

To prove her point, she shows an Excel spread sheet on her laptop listing customers from all over the world: Italy, Denmark, United States, Canada, Dubai, Russia and more. She said she recently sold a large amount of counterfeit Beats by Dr. Dre for $50,000 to a British businessman who sent them to the UK by jet -- which is considerably more expensive than container ship -- and sold them as originals.

While top-line Beats headphones retail for $400, the Shenzhen operators interviewed sell knock-off versions wholesale for $70. "A lot of people are making a lot of money on Beats right now," she said.

Factory owners here have a nose for what's hot and what's not. Nearly 70% of all fake goods -- including DVDs, clothing, and electronics goods -- seized worldwide from 2008-2010 came from China, according to the World Customs Organization.

And looking at the shops in Shenzhen's Huaqiangbei commercial district -- a destination for buying electronics, especially fakes -- Beats by Dr. Dre are definitely hot, prominently displayed next to iPhones, Samsung gear and Nikon cameras. To look at them, some are clearly fakes with poor packaging and logo color schemes that are wildly different from those well-known products.

Rise of high-priced headphones

Behind the shops and inside small rooms around the district, workers in their early 20s can be seen busily assembling counterfeit goods, such as smartphones and iPads. The long corridors are filled with cigarette smoke that drifts out from the tiny workshops as deliverymen rush by with their arms full of electronic components. Everywhere you hear the sound of packing tape being wrapped around cardboard boxes.

The counterfeit boom is fed, these days, by the rise of high-end headphones that Dr. Dre's audio products helped kickstart with the launch of Beats in 2008, analysts say. Just a few years ago, few people would be ready to pay several hundred dollars for a pair of headphones. Now, with celebrities like Lady Gaga, Justin Bieber and P. Diddy putting their names to signature pairs, Beats is the hottest brand for stylish music lovers.

"Today, the premium headphone market is defined by fashion and brands as much as it is by sound quality," Ben Arnold, director of industry analysis at market research firm NPD Group said in a recent report. "One third of premium headphone buyers are under the age of 25 and many of these consumers view headphones as equal parts listening device and fashion accessory."

Richard Kramer, analyst at Arete Research, added that better audio quality in smartphones is also one of the main driving forces behind making high-end headphones viable.

In the U.S., sales of headphones rose by a third last year to $2.4 billion, with Beats by Dr. Dre making up almost 70% of all high-end headphones during the Christmas period, according to market research firm NPD. In Europe, sales of headphones hit an all-time high in the first quarter of the year, figures from market research group GfK show, with premium headphones leading the way. Total sales increased by 9% during Q1 on Europe's 17 main markets to 304 million euro (US$410 million), according to GfK.

Real or fake headphones?

At another Shenzhen store, a sales executive at a factory and trading company, connects a pair of fake Beats Pro to her iPhone and puts them on the reporter's head. The sound quality is surprisingly good. In the U.S., an original pair would cost $400. She offers her best quality headphones for the wholesale price of $70, medium quality for $45 and "so-so quality" for $30.

"Medium quality is most popular, but the trend is going towards high-end. Consumers want good sound," she said, adding that she can deliver 100 units of any Beats product by the following day. For 1,000 items it will take a week. "Since it's copies, we don't want to have too much in stock," she said.

On the streets and down in the subway, in-ear Beats headphones are sold for as little as $1. According to the company website, real in-ear Beats sell for $100 and up.

Beats Electronics, the company behind the Beats by Dr. Dre brand, said in an email to CNN that the company shows "a fierce commitment" to fight piracy and that it works in close collaboration with anti-counterfeiting organizations, police and customs authorities to identify counterfeit sellers, distributors and manufacturers on key markets. They also scan online marketplaces for unauthorized use of Beats trademarks.

"Since efforts began, Beats has seized hundreds of thousands of counterfeit products in more than 50 countries," the company said.

The U.S. government has long complained about the theft of intellectual property in China. CNN reached out to authorities in Shenzhen to ask about counterfeit sales activities, but they have not yet responded. However it appears that Chinese officials are moving to crack down on counterfeit trade. A month-long joint operation with U.S. Customs in July resulted in the seizure of more than 243,000 counterfeit products using trademarks from Beats by Dr. Dre., Apple, Blackberry and Samsung. U.S. Customs and Border Protection said the operation was the biggest bilateral customs enforcement effort ever conducted by the U.S.

As a result, a man in New Orleans was arrested for allegedly importing counterfeit Dr. Dre headphones and selling them on Craigslist.

Evading the police

But in Shenzhen, the counterfeiters are working hard, too.

CNN spoke with another woman involved in the trade -- a "copy brand exports professional" according to her business card -- who helps companies to transport counterfeit goods from Shenzhen to other countries. She said she advises her customers to avoid Chinese logistic companies and always use European or American shipping companies since "customs usually trusts these brands better."

Storeowners reveal other tricks to bypass customs. They send all Beats in two boxes; the outer box has a made-up name to hide the real goods. "We got the idea from a European customer," she said.

Precautions aside, in the Huaqiangbei commercial district few seem to have any moral objections about the pirating of goods.

Outside the Huaqiangbei Police Station, a friendly officer in sunglasses points down the street when asked where the best fake mobile phones can be found. Asked if such purchases are legal, he just breaks out in loud laughter.

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U.S. be warned: Default would cause global crisis

________________ As the U.S. partial government shutdown continues into almost a third week, the stakes are growing. Of upmost concern is not a lengthy closure of the federal bureaucracy, but that Washington could default on its debt around October 17, unless the debt limit is raised by Congress.

The impact of default could be catastrophic, and not just economically. As Secretary of State John Kerry asserts, this would send a message "of political silliness" that we "can't get our own act together" so we need to "get back on a track the world will respect."

In other words, the country's reputation as a responsible international power, both in terms of domestic and foreign policy, is being undermined. Recognizing the gravity of the situation, President Barack Obama cancelled his important week-long trip to Asia to try to secure a breakthrough.

Internationally, the spectacle of what is perceived as Washington's growing political dysfunction in recent years is as bemusing as it is alarming. And, according to some data, this is a driver behind a decline in the country's international reputation.

For instance, the 2012-2013 FutureBrand Country Index shows a continued fall in the international ranking of the United States compared to other nations. Based on a sample of about 3,600 people in 18 countries, it concludes that the country is "in decline," partly because of "successive fiscal crises."

__This builds on earlier studies by the organization, including in 2011-12 which highlighted "intensified speculation about America's long-term stability," partly as a result of the downgrade by Standard & Poor's of the country's credit rating. This was prompted by the last near debt default of Washington in 2011.

These findings on the U.S.'s reputation are echoed by the 2013 BBC Country Rating Survey, which interviewed about 26,000 people in 25 countries, and also the 2013 Pew Global Study based on a sample of about 37,600 in 39 countries. The BBC poll recorded a fall in positive views towards America for a second consecutive year, while the Pew survey found that pro-U.S. sentiment is slipping, after a strong bounce following Obama's election in 2008.

international concern with U.S. foreign and military policies. Indeed, the country's reputation had fallen to its lowest level since at least the Vietnam War.

Then, as now, however, the country retains attractive qualities for many foreigners, including its popular culture and economic innovation. And the fact remains that, in times of major urgency, Washington can transcend partisan divisions and work in the national interest.

This was demonstrated, for instance, during the 2008-9 financial crisis when Congress and the administration acted more swiftly and comprehensively than many other countries to counteract the worst economic turmoil since at least the 1930s. This has been key in enabling the country to recover more quickly from recession than some other areas of the world.

While current problems should therefore be put into context, the situation is nonetheless troubling. And this is not the first time this year that a Washington political impasse has threatened negative economic repercussions.

Only at the 11th hour did Congress in January agree a deal to prevent the U.S. falling off the "fiscal cliff." It is estimated that the automatic tax increases and spending cuts might well have taken the U.S. economy back into recession.

At the core of the current troubles is not just growing polarization between Democrats and Republicans, but significant intra-party divisions too. This is especially so between moderate and right-wing Republicans (and the Tea Party faction).

Thus, although House Speaker John Boehner, the Republican leader in the House of Representatives, has pledged that Washington will not default, his efforts are being undercut by more conservative colleagues. He may therefore have to rely on Democratic votes to secure approval for raising the debt ceiling in the House.

Political infighting looks likely to only intensify in the build-up to next year's congressional elections. This threatens key reforms on the horizon, including an immigration overhaul, which is of interest to many internationally.

The perception, in many foreign capitals, is that growing partisanship is also infecting U.S. foreign policy. And, this is feeding angst over the reliability of Washington as an international partner, as has been vocalized in recent days by several countries, including China, Japan and Mexico.

Already this month, Obama has lost the opportunity to advance the Trans-Pacific Partnership trade deal as a result of the cancellation of his Asia trip. Meanwhile, U.S. trade officials were forced to postpone second-round negotiations with Brussels over the proposed Trans-Atlantic Trade and Investment Partnership.

The gravity of this reputational issue for U.S. foreign relations was recently acknowledged by two former defence secretaries. Republican Donald Rumsfeld asserted that "lack of leadership is sending a signal around the world that the United States is in decline, that that we're withdrawing, that we as a country are not going to behave in a rational manner." Meanwhile, Democrat Leon Panetta bemoaned that by "governing by crisis after crisis after crisis...the world will view the United States as less able to back its word with power."

Looking ahead this month, it remains most likely that a deal will be done before October 17 to raise the debt limit. And some scholars believe Obama has the constitutional power to raise the ceiling without congressional approval, a claim that the White House has so far rejected.

With uncertainty growing, the only sure thing is that default would send seismic economic and political shockwaves across the globe. This would not just further undermine the U.S.'s reputation as a responsible international power, but potentially send it into freefall again.

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 pipeline: Chevron likely to lead consortium that will finance, run the project

Pakistan could not attend the meeting because of growing tensions with New Delhi over firing incidents on the borders. 

ISLAMABAD: 

US energy giant Chevron has emerged as a potential leader in a consortium that will finance and run the transnational Turkmenistan-Afghanistan-Pakistan and India (TAPI) pipeline.

 According to sources, the four countries linked with the TAPI project are in the process of setting up a consortium and selecting a technically capable and financially sound company as consortium leader, which will design, finance, construct, own and operate the gas pipeline.

Chevron, a renowned oil and gas company with vast experience in the energy sector including gas pipelines, is one of the potential consortium leaders for the project, they say.

Indian and Afghan officials also met a representative of Chevron in Delhi to discuss the company’s potential role in the project as a consortium leader. However, Pakistan could not attend the meeting because of growing tensions with New Delhi over firing incidents on the borders.

Still Pakistan is keen to see Chevron undertake work on the pipeline and sources stress there is a strong possibility that the US energy giant will be selected as consortium leader to finance, design and build the pipeline.

On its part, Chevron has sought exploration rights in Turkmenistan as well as contracts in response to financing and running the project. However, Turkmenistan has offered exploration rights for offshore fields and asked Chevron to swap gas found in these fields for onshore ones and export it to Afghanistan, Pakistan and India under the TAPI project.

The offer comes as Turkmenistan does not allow foreign companies to search for hydrocarbons on onshore fields.

“The Turkmen government invites US and European oil and gas companies to drill offshore wells and the gas extracted may be swapped for gas extracted from onshore wells for export to Afghanistan, Pakistan and India under the TAPI gas pipeline project,” a source familiar with the development told The Express Tribune.

Efforts to construct the TAPI pipeline have been stepped up as the US is pushing Pakistan to press on with the project and shelve the Iran-Pakistan (IP) pipeline due to a standoff with Tehran.

However, the new government of Pakistan Muslim League-Nawaz (PML-N) has fended off the pressure and assured Iran that work on the IP pipeline will go on according to schedule.

Under the TAPI project, Pakistan will get 1.365 billion cubic feet of gas per day (bcfd) from Turkmenistan, India will also receive the same 1.365 bcfd and Afghanistan will get 0.5 bcfd.

Turkmenistan will export natural gas through a 1,800km pipeline that will reach India after passing through Afghanistan and Pakistan.

Pakistan and India have already signed gas sale and purchase agreements and efforts are under way to attract potential investors for financing the project.

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 Oil prices down

SINGAPORE: Oil prices edged lower in Asian trade Monday on growing concerns the US budget crisis could spiral into a devastating debt default and ravage the global economy.

 New York's main contract, West Texas Intermediate for delivery in November fell 57 cents to $103.27 in mid-morning trade, while Brent North Sea crude for November eased 40 cents to $109.06.

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US shutdown: what it means for the global economy

HOW have financial markets reacted to news of the shutdown? US markets were closed by the time the formal notices started going out late on Monday night ordering government agencies to suspend their activities—the so-called shutdown.

But on international markets overnight and on Tuesday morning, the dollar has lost around half a per cent of its value, pushing the pound up to $1.6238 –the highest level since Jan 3, 2013. The euro has risen to $1.357, the highest level since early February.

However, international stock markets were largely unmoved by the crisis—French and German shares, for example, were up around 0.5 per cent—with most investors expecting the shutdown to be short-lived, and the impact largely confined to the US.

Some analysts said investors may also be reasoning that the crisis could delay the so-called “tapering” of the Federal Reserve’s recession-busting policy of quantitative easing, which helps inflate share prices by pumping cheap money into financial markets.

Ilya Spivak, currency strategist at Daily FX, said: “The somewhat counter-intuitive response seems to reflect investors’ continued pre-occupation with the direction of US monetary policy. Filtered through this prism, the shutdown and its negative implications for US growth are seen as delaying a move to ‘taper’ QE asset purchases, which seems to be driving a swell in risk appetite.”

So does that mean it’s just a little local difficulty for the Americans?

Yes and no. The direct economic hit may be relatively small: analysts at the ratings agency Moody’s suggest a week-long outage could cut a relatively manageable 0.3pc off GDP. But a serious knock to confidence could rattle consumers and investors at a crucial time.

The US recovery remains fragile, as the Fed stressed last month when it decided to continue buying $85bn-a-month worth of bonds, instead of “tapering” QE.

A major wobble, throwing the spotlight back on to the health of the US public finances, is the last thing the nascent upturn needs; and it could also exacerbate markets’ anxiety in the run-up to the potentially fraught debate over raising the government’s budget ceiling in mid-October.

What about the rest of the world?

Any prolonged shutdown would rapidly start to hit US consumer spending, as hundreds of thousands of public sector workers are furloughed; and that will crimp America’s demand for imports from the rest of the world.

At the margins, weaker investor confidence, and the dollar depreciation that has so far been the main financial impact of the shutdown, could also slow the flood of capital into the US that was one of the key trends in international markets over the summer.

The switch from riskier markets to the perceived safety of America drove up exchange rates and bond yields in many emerging economies, forcing central banks in several countries, including India and Brazil, to take emergency action.

A renewed sense of crisis in the US is likely to stem that flow, particularly after the Fed had already raised questions about the health of the US economy when it declined to “taper” QE in September.

What will China think?

Beijing’s attitude is the key to one of the more subtle potential implications of this latest budgetary wrangle.

China holds a mountain of US assets, mostly Treasury bonds, effectively IOUs from Washington—the by-product of running huge trade surpluses over the past decade and a deliberate policy to keep the Chinese currency, the yuan, cheap.

However, Chinese politicians have repeatedly expressed concern over recent years about the growing risks of this large exposure to the US, as Washington has appeared increasingly unable to bring tax-and-spending policy under control.

When the US was stripped of its AAA credit rating by Standard & Poors in August 2011, after a previous partisan wrangle over raising the government’s debt ceiling—not a problem suffered in autocratic single-party states—China reacted with fury.

Xinhua, the official news agency, said: “The days when the debt-ridden Uncle Sam could leisurely squander unlimited overseas borrowing appear to be numbered. To cure its addiction to debts, the US has to re-establish the common sense principle that one should live within its means.”

Since then China has deliberately moved towards making the yuan more convertible on international markets, which would allow it to appreciate, and reduce the need to pile up potentially risky US debts—a policy that in the long term could remove the biggest buyer of US debt from the markets, potentially making it far more costly for America to borrow.

Simon Derrick, of BNY Mellon, suggested the lack of outraged comment over the current budget impasse may suggest “the Chinese government has already made its mind up about what it needs to do and sees little point in complaining any further”.

By arrangement with the Guardian