Why Trust Is a Key Factor to Unlock the Benefits of Trade Reforms

Research into public-private partnerships shows four key factors can improve relationships, ease friction, and boost trade.

  • Mistrust between private and public sectors can be turned around in a short matter of time with third-party help
  • Study into customs reform in the automotive industry in post-conflict Colombia shows vast improvement in public-private trust
  • Global Alliance for Trade Facilitation finds common ground for complex import-export sector

A major study into the impact of trust in international trade has found that poor relationships between the private and public sectors can be dramatically overhauled and rebuilt in a short matter of time with a series of simple strategies.

The Global Alliance for Trade Facilitation (the Alliance) conducted ground-breaking research into relations between private sector stakeholders in the Colombian automotive industry and state-led border control, measuring transformative cooperation between the two.

The Alliance’s efforts in Colombia

The Alliance has worked alongside the Colombian Customs and Tax Administration (DIAN) and business to develop and establish a Centre for Excellence to process advance rulings affecting the automotive industry. Advance rulings on the classification, origin, and valuation of imports and exports streamline customs operations and give traders certainty and predictability regarding the customs treatment of their commodities.

When project scoping began in 2016, Colombia’s economy was experiencing strong growth, but its participation in global supply chains was low. As a result, the percentage of goods and services exports relative to Colombia’s GDP was only 14.7%, compared to its neighbours in Latin America and the Caribbean at 21.3%, according to the World Bank.

Measuring trust in the Colombian context

Working with academics from the University of Queensland, the Alliance was able to identify a contributing factor to the sector’s difficulties outside the realm of standard textbook economics: trust between the private sector and DIAN was in short supply. Public and private stakeholders partly blamed a “chronic lack of coordination” for the country’s low flow of exports.

But through its public-private partnership approach, the Alliance was able to improve trust and relations, increasing inter-sector reliance and information sharing and reducing friction at the border.

As part of its research, the Alliance used a mixed-methods approach to retrospectively track changes in trust between the private businesses and associations and the state-run authority. It surveyed 27 key stakeholders, interviewed 22 representatives from both sectors, and conducted a focus group involving private sector companies and business associations. Researchers also reviewed dozens of relevant project documents to help develop the report’s findings.

The findings

In just a short time, trust between the two groups increased across the board, with more than two thirds (67%) of both private and public sector stakeholders reporting a growth in the sentiment. According to respondents, communication improved, with both parties having a better grasp of each other’s needs and interests. Perceptions of benevolence, competence and integrity – key drivers of trust – also improved. The results of the study hold promise for applicability outside of the realm of trade, showing that trust and reform across a variety of areas – from economic development to public safety – can work hand in hand to increase public-private cooperation.

As one private sector interview participant commented: “It’s different nowadays. We share information, sensitive information, and the companies and the directors of the companies feel safe giving that information. Now every week we call to report specific situations; that demonstrates that trust has increased a lot between us.” 

Four success factors were crucial in helping drive improved relations between the public and private sectors, the study found. The Alliance is using that information to further strengthen relationships in Colombia and other sectors and countries around the world.

These key factors were:  

  • A space for dialogue and information sharing, as encouraged by the Alliance bringing a number of private and public stakeholders to the same table.
  • The opportunity to achieve together, helping both sectors achieve joint “wins” and establish common ground to provide solutions for shared problems.
  • Committed leadership by key actors from both sides, with all parties showing respect, understanding and tenacity.
  • A well-respected project leader to serve as a go-between, aided by the Alliance’s strong level of trust with its private and public partners.

Philippe Isler, Director of the Global Alliance for Trade Facilitation, said: Our ground-breaking work in Colombia shows the importance of trust to global trade, and that delicate relationships between even the most adversarial partners can be built and repaired with third-party guidance. A trusting relationship between the public and private sectors can lower trade barriers and spur social and economic growth. These findings are important for any industry or business wishing to build trust in public-private partnerships and, in turn, create efficiencies and boost revenue. The Alliance is committed to replicating its success building trust in Colombia to other sectors and countries, and we’re excited for more countries to come forward to make use of our support and expertise.”

Juliana Rico, Executive Director, Automotive Chamber in the National Business Association of Colombia, said: “It was not clear trust was the crucial element we were missing until the Alliance helped us review our practices. We want to thank the Global Alliance for Trade Facilitation for working with the Customs authority in Colombia. Without their knowledge and experience, the country would not be reaping the rewards of a cooperative and collaborative approach to solving trade issues at the border.”

Ingrid Diaz, Customs Director of DIAN, said: “The Global Alliance for Trade Facilitation has been a driver of the public-private interaction and has been a key factor in the strengthening of trust between the different trade actors in Colombia. These real, two-way discussions are the key to understanding the needs and wants of businesses and developing meaningful solutions. Through such honest and open conversations, we hope to build trust further and make Colombia’s automotive industry as competitive as possible.”

For more information, see our overview report here.