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Alibaba and Trump: Can a Chinese E-commerce Company Save the American Dream?

Trump Tower

Donald Trump’s meeting in New York with Jack Ma, the founder of China’s Alibaba Group, raises fascinating questions about how to create jobs in a rapidly changing global economy.

Ironically, after years of unbridled China-bashing, a Chinese company might be instrumental in empowering Trump’s rural America, which today finds itself cut off from the country’s urban economic nodes. Could this same Chinese company open the door to increased trade at a time when the topic of globalization continues to incite anger?

The Jack Ma meeting also raises questions about the changing business culture in Washington, which seems to be sliding toward a more opaque “China Inc.” model, where backroom deals and making the right connections are the order of the day.

Mr. Ma has promised to create one million new jobs, by paving the way for Americans to sell their wares and services on Alibaba’s global platforms. While actual numbers would be hard to validate, the premise is plausible, and worthy of further discussion.

America’s Taobao Villages

Most Westerners know very little about Alibaba. It’s best described as a mashup of companies like Amazon, Google, eBay and PayPal, plus a variety of other e-commerce services, bundled together into a massive platform ecosystem. The e-commerce juggernaut has disrupted the traditional business landscape, with hugely beneficial results for the proverbial “little guy.”

Alibaba’s e-commerce platforms connect small business enterprises in remote, rural and under-developed regions of China directly to the global market place. When it comes to technical prowess in emerging and undeveloped markets, Alibaba is well ahead of its Western counterparts.

Platforms like Alipay and Ant Financial have indeed revolutionized peer-to-peer sales and micro finance, while ensuring trust and security for billions of daily transactions. Other platforms such as CAINIA seamlessly connect logistics resources and facilitate global trade management for cross border commerce. For millions of previously excluded market participants in China, long-standing barriers to entry have been eliminated.

The Alibaba platform ecosystem has empowered hundreds of thousands of “e-tailers” in the so-called Taobao Village network across China; and it has created thriving micro-markets in some of the most unlikely places.

So why shouldn’t the good people in the struggling small towns of the USA have their own version of a Taobao Village? When the money starts to come in, it won’t matter to small business owners where in the world their customers and strategic partners are located—despite the globalization backlash that has been so widespread.

In the long-term, connecting a broad swath of people to markets via digital platforms and collaborative networks has the potential to create far more jobs than Mr. Trump’s high profile corporate witch-hunts. Arm-twisting US companies such as the Carrier Group and Ford Motor Company may result in symbolic “America First” victories, but will not deliver the required number of new jobs. These corporate welfare deals will have little impact in the broader context of the twenty-first-century economy.

Alibaba’s commitment to small businesses is part of a broader, long-term strategy to dominate the emerging economic landscape. The plan: ubiquitous high tech infrastructure and connectivity must be intertwined with the development of hard infrastructure such as roads, ports and energy grids.

$100 billion war chest

Western tech companies should pay close attention to the Alibaba plan, and get on board wherever they can. Ma’s company has been working closely with the Chinese government to build e-commerce capacities into the construction of China’s One-Belt-One Road (OBOR) initiative, the largest infrastructure project in human history. Beijing has a $100 billion war chest at its disposal, which it plans to use to accelerate the development of fintech and e-commerce.

Free trade is also an integral part of a robust e-commerce environment, and (again, ironically) Alibaba is a pioneer. Mr. Ma is currently in discussions with the World Trade Organization to roll out a global trade platform—eWTP—which could expedite, simplify and substantially increase the volume of cross border e-commerce transactions.

When this comes to fruition, it could help millions of small business that previously missed out on the benefits of free trade agreements, largely due to the excessive costs of compliance and the confusing assortment of rules, regulations and red tape.

In the true spirit of a tech company, Alibaba would continue to form collaborative partnerships with US firms and open-source its product development, as it currently does. Between the benefits to small businesses and other stake holders, it looks like Mr. Trump’s meeting with Jack Ma could yield some promising results.

Gaining access

The Trump-Ma discussion was arranged through Jay Clayton, a Wall Street lawyer in Mr. Trump’s inner circle, with former ties to Alibaba. The lead up to their talk featured Chinese “guanxi” at its best – the art of gaining access to public officials, deal makers and other desired subjects through well cultivated relationships.

In China, guanxi pervades the national culture. Influence is routinely bought and sold for access to decision makers, gatekeepers and the well-connected. Those that are close to—or inside—the highest levels of power command the most lucrative guangxi fees. For this reason, nepotism is deeply entrenched.

It appears that the new White House will also place a premium on family connections: Mr. Trump’s daughter, Ivanka, his son, Donald Trump Jr, and his son-in- law, Jared Kushner, have all been brought into the White House as advisers. And all of them have been directly involved in managing Mr. Trump’s business empire.

Recently, the office of the United States Trade Representative placed Alibaba on the notorious markets list (four years after being taken off the list) for failing to prevent increasing sales of counterfeited and pirated goods on its Taobao site.

However, this was barely discussed in the meeting between Trump and Ma, which outside observers claim is further evidence of a shifting business culture towards crony capitalism. As a transparent, rules-based system gives way to an art-of the-deal mentality, business expediency will override concerns with ethical standards.

In fairness to Alibaba, as the world’s largest e-commerce company, it has expended a massive amount of effort and capital to combat fraudulent transactions and the sale of knock off goods on its sites. Given the volume of daily transactions – on a global scale—it would be impossible to eliminate every single such occurrence.

The prospect of an Alibaba-driven jobs renaissance in the American heartland, and in its cities, remains a fascinating possibility. But questions about what might happen to the broader business culture during a Trump Administration will also compel further discussion.

This article was first published on on January 12, 2017