GE CEO Jeff Immelt Discusses Globalization
Jeff Immelt, the chairman and CEO of General Electric (GE), visited Georgetown University on May 4 to discuss globalization and the role of private and public leaders in ensuring the ability of the United States to compete in global markets. The Walsh School of Foreign Service (SFS), McDonough School of Business Stanton Distinguished Leaders Series, and Landegger International Business Diplomacy Program hosted the event.
SFS Dean Joel Hellman welcomed Immelt, who has held his position at GE since 2001, calling him a global leader who inspires “growth through innovation and globalization.” GE recently celebrated its 125th anniversary, and is the only original company on the Dow Jones to still exist. In light of its long history of global business, GE has a responsibility, Immelt believes, to think about globalization: “what works, and what doesn’t work, and what needs to change.”
U.S. Protectionism Doesn’t Help American Companies “Compete for the World”
Immelt cited statistics that the United States has 5 percent of the world’s population and 25 percent of the world’s gross domestic product enabling the United States to “compete for the world.” American companies must strive for export-led growth and compete for a global market share, according to Immelt; and protectionism is not the answer.
However, the current body of political thought that leans toward protectionism is understandable to Immelt. He explained several of the reasons he recognizes as responsible for this rising trend of economic nationalism: China changed the game; the global elite became removed from ground-level issues; trade deals became a matter of distrust and fear; and companies took the “easy” route to globalization through outsourcing and low wages.
And while Immelt does not believe it will be possible to return to a “pure free-trade world,” he argued that the United States has the most to lose from a turn to protectionism. Instead, Immelt proposed a plan for re-engagement with the world that will help American workers from the factory floor to the corner office.
“We believe that the will to compete is the purest American value. Instead of moving backward, let’s compete for the world. Let’s try harder,” he said. “This is true for both the private and public sectors. For companies, we should aspire to have the same market share globally that we do in the U.S. Globalization should be more about growth than cheap wages. By so doing, we will grow exports. For government, we should level the playing field. We should make our country more competitive by embracing tax reform and infrastructure investment. At the same time, we should engage globally to make sure all markets are open for U.S. products.”
GE as a Model for Export-Led Globalization
Immelt presented GE’s global practices as a potential model for export-led globalization. In 1982, when he started at GE, 80 percent of the company’s revenue was within the U.S.; in 2017, nearly 70 percent of GE revenue will be global. To make these changes, GE has turned away from outsourcing and “importing low wages,” in exchange for what Immelt called “connected localization.” This means that GE workers are on the ground in all of the 180 countries in which the conglomerate competes.
“Our strategy is based on connected localization,” he said. “Our advancement requires building capability on the ground in fast-growing global markets. We earn our right to compete by investing, operating, and building relationships in the countries where we do business.”
His advice for other American companies is that they do the same: “U.S. companies must get more local [and] realize that sustainable growth requires local capability inside a global context.”
U.S. Government Role
Business efforts abroad must be supported by government efforts at home, he said. The U.S. government, Immelt argued, must work to level the playing field in terms of American companies’ ability to compete in foreign and domestic markets. This means, for one, tax reform, because the “current policy favors foreign companies operating in the U.S. over American companies operating abroad; and favors American companies who import goods manufactured outside the U.S. over companies that manufacture in the U.S. and export.”
Immelt added that the government must fix American infrastructure, including airports and roads, to ease transportation costs; reduce regulations so American companies can “learn to compete again”; and invest in bilateral trade deals that allow the United States to “continue to shape the terms of trade.”
One of the trade deals Immelt hopes to see improved is the North American Free Trade Agreement (NAFTA), because he views it as an opportunity to create a North American energy bloc that would incentivize U.S. manufacturing. Again, Immelt stressed the importance of engaging the world rather than retrenching from global economic commitments.
“We will not grow if we don’t trade with people. We need to be confident and strategic,” he said. “The principles for trade need to be rethought for the modern age. The systems of free trade haven’t worked for enough people. But protectionism is not the answer. It makes us look weak, not strong. One of the core American values is the desire to compete. In sports, they say ‘the best defense is a good offense’; the same is true in trade.”
Global Leaders Must “Earn the Right to be Globalists”
Immelt’s advice for students trying to become confident, strategic global leaders is to see globalization for themselves by traveling, getting to know the world, and ultimately developing their own point of view regarding the world and global competition. He argued that there is an opportunity cost to the United States not moving at the same speed as its global competitors; global leaders in the public and private sectors must, in 2017, “earn the right to be globalists.”
“American companies should be winning in global markets, not using them for cheap wages that harm American workers. And our government should level the playing field. Both of us should make a bold statement that the U.S. plans to build economic strength and engagement around the world. I say with 100% certainty: if American companies get a level playing field outside the U.S. and commit to global markets, America will win more business, create more jobs and reduce the trade deficit.”
In closing the event, McDonough School of Business Interim Dean Rohan Williamson thanked Immelt for coming to Georgetown to speak with students who themselves are preparing to become global-ready business leaders.
– Aislinn McNiece