Thursday January 2, 2025
The seaside town of Berbera is slowly transforming as it takes on a major role on the Red Sea shipping route, allowing breakaway Somaliland to dream of prosperity and even recognition. (AFP)
Ethiopia's expanding economic ambitions have intensified its pursuit of seaport access, transitioning its focus from Eritrean and Djiboutian ports to Somali ones. This shift has heightened Somalia's sovereignty concerns, particularly given Ethiopia’s actions, such as its Memorandum of Agreement (MOA) with Somaliland, and its broader geopolitical aspirations. The Ankara Declaration, intended to promote collaboration between Somalia and Ethiopia, highlights the complexities of balancing Ethiopia’s interests with Somalia’s sovereignty. While the declaration emphasizes "secure and sustainable access to and from the sea" for Ethiopia, it lacks specificity regarding the nature and extent of this access. [2] This ambiguity raises critical questions about whether Ethiopia’s use of Somali ports would remain strictly commercial or extend to military or logistical purposes, directly challenging Somalia’s maritime sovereignty and regulatory authority. While the declaration’s non-binding nature provides flexibility for negotiation, Somalia risks the declaration evolving into binding agreements that may unintentionally undermine its control over its maritime domain. Adding to these challenges is the absence of references to any legal instruments, such as the Memorandum of Understanding on maritime delimitation, creating potential conflicts and overlaps in future agreements.
While Somalia is under no obligation to accommodate Ethiopia’s goals, the United Nations Convention on the Law of the Sea (UNCLOS) requires coastal states to provide landlocked nations with reasonable and equitable access and transit to seaports. However, before any access or transit agreement can be negotiated, Somalia’s sovereignty concerns must be directly addressed as a precondition to ensuring mutual trust and cooperation.
Access to a seaport and transit through a country involve distinct legal issues that must be addressed separately. Access determines whether a foreign entity, such as a nation or organization, can use a Somali seaport—for purposes like establishing a military base or enabling a landlocked country to use the port commercially. Transit pertains to how a landlocked country, like Ethiopia, transports goods through Somali territory to or from a seaport. Thus, granting Ethiopia access to a seaport raises different legal considerations than allowing its goods to transit through Somalia. Separating these issues and negotiating them independently is essential to safeguarding Somalia’s sovereignty and ensuring clear agreements.
If commercial use is agreed upon, port development may be included in the access agreement or handled as part of the transit agreement, which addresses broader infrastructure issues related to the movement of goods. This paper assumes Ethiopia and Somalia reached a commercial access agreement (which explicitly addressed Somalia's sovereignty concerns) and that all infrastructure matters related to access and transport, including port development, are addressed within a transit agreement. Resolving these distinctions clearly is vital for effective and aligned negotiations. By tackling these issues upfront, both nations can work toward a fair and balanced arrangement—one that respects Somalia’s sovereignty while meeting Ethiopia’s need for maritime access.
In negotiating the transit agreement, Somalia should take lessons from existing agreements between landlocked and coastal nations and ensure that the terms of any agreement with Ethiopia protects Somalia’s infrastructure and mitigate economic and security risks while aligning with Ethiopia’s needs. This paper outlines the key terms and conditions Somalia should prioritize, primarily focusing on infrastructure development, trade diversion issues, customs facilitation, environmental protection, transit corridor security, and the management of high-risk goods. These terms and conditions are not exhaustive, but they provide a starting point for effective negotiations.
1. Infrastructure Development
Infrastructure development is a central consideration in any transit agreement. The increased use of Somali ports by Ethiopian goods will put substantial pressure on Somalia’s transport infrastructure, especially its roads, which are currently inadequate to handle a significant increase in traffic. Without significant investment, Somalia risks inefficiencies and further deterioration of its infrastructure.
Somalia should draw from examples of other successful agreements, such as the Northern Corridor connecting Uganda to Kenya’s Mombasa port, and the major infrastructure upgrades to Djibouti roads to support Ethiopian trade. The Lamu Port-South Sudan-Ethiopia Transport (LAPSSET) Corridor [3] and the India-Nepal transit agreements highlight how infrastructure projects benefit all participating countries, with each contributing based on their level of usage. Somalia should require Ethiopia to contribute significantly to the development and maintenance of its ports and transport networks. This includes investing in the construction of railways, new roads, and upgrades to existing routes connecting Ethiopian goods to Somali ports. Given that Ethiopia is the primary beneficiary, it is reasonable to expect it to bear a substantial share of the costs. Somalia’s economic circumstances further justify this expectation. The agreement must clearly define each party’s responsibilities for construction expenses and ongoing maintenance.
Additionally, Somali ports, while strategically located, lack the capacity to handle Ethiopia’s anticipated trade volume. Somalia should require Ethiopia to invest in port expansion, including new container terminals, cargo handling upgrades, and specialized storage facilities. These improvements are essential to ensuring Somali ports can efficiently support Ethiopian trade.
2. Transit Fees and Revenue Sharing
While international norms exempt goods in transit from tariffs imposed by the transit country, Somalia must still ensure it benefits financially from Ethiopian goods passing through its territory. At minimum, the use of Somali infrastructure for Ethiopian trade must generate sufficient revenue to cover infrastructure improvement, maintenance, and the costs of customs administration. In this regard, Somalia should establish a clear and transparent system of transit fees, calculated based on the volume and value of Ethiopian goods transported through its territory. These fees should be high enough to cover infrastructure development and maintenance costs, while also allowing Somalia to benefit from facilitating Ethiopian trade.
The agreement should clearly define how revenue from transit fees will be shared. A substantial portion of the funds should be set aside for improving and maintaining the necessary infrastructure, including roads, railways (if any), and ports. Given Ethiopia’s primary benefit from the transit routes, Ethiopia should accept that a substantial portion of any fees collected from infrastructure usage is used for financing these improvements as part of its transit costs.
3. Facilitating Transit of Goods
Efficient customs procedures are essential to ensuring the smooth flow of goods through Somali ports. Given the significant share of Ethiopian goods in transit, Somalia must streamline its customs procedures in line with international best practices, without compromising its ability to monitor high-risk goods. Somalia should negotiate simplified customs procedures for Ethiopian goods in transit, akin to those outlined in the World Trade Organization’s (WTO) Trade Facilitation Agreement (TFA). [4] These procedures may include pre-clearance of goods, electronic submission of customs declarations, and expedited clearance processes for trusted traders. However, Somalia must ensure that simplified customs procedures do not compromise its ability to monitor and prevent the illegal diversion of high-risk goods.
To facilitate trade, Somalia should also push for the establishment of joint customs posts along critical transit routes. These posts would allow Ethiopian goods to be pre-cleared before reaching Somali ports, reducing congestion and ensuring faster transit times. Transparent and fixed customs fees are also essential to avoid arbitrary increases that could undermine the agreement.
4. Preventing Trade Diversion
Once concerns about sovereignty violations are addressed, one of the most pressing issues Somalia faces in an access and transit agreement is the risk of trade diversion, where goods meant for transit are unlawfully redirected into Somalia’s domestic market. Trade diversion can lead to several legal and economic challenges for Somalia, as it may violate Somalia’s obligations under Regional Trade Agreements (RTAs), Free Trade Agreements (FTAs), and the World Trade Organization’s (WTO) Most Favored Nation (MFN) principle. [5]
For example, to comply with the rules and regulations of RTAs, such as the East African Community’s (EAC) Common External Tariff (CET), Somalia must ensure that goods in transit are clearly defined as being en route to Ethiopia and not intended for sale or consumption within Somalia or any other EAC member state. By limiting the agreement to cover only transit goods, Somalia can ensure that these goods are exempt from the EAC’s CET.
Trade diversion also poses legal risks under FTAs, especially when goods in transit do not meet the Rules of Origin required for tariff reductions. If goods destined for Ethiopia enter Somalia without undergoing the required tariff processes, Somalia could be in violation of its FTA obligations, leading to potential trade disputes with third-party countries.
The potential for violating FTA obligation exit even when Somalia has a zero-tariff agreement with the importing country because the illegal diversion of goods intended for Ethiopia into the Somali market could cause regulatory issues under the FTA. Goods that are designated for transit often bypass the usual regulatory checks, such as quality standards or labeling, which may be required for goods entering Somalia’s domestic market under an FTA. The evasion of such regulations could undermine Somalia’s local industries, and lead to formal complaints or retaliatory measures from trade partners.
Even when there are no FTA or RTA between Somalia and the importing country, allowing transit goods to be diverted into Somalia without applying proper tariffs could violate the WTO’s MFN principle. Under this principle, WTO members [5] are required to offer the same tariff rates to similar goods from different trading partners (except for trade under FTA or RTA). Because diverted goods effectively receive preferential treatment by entering Somalia under zero-tariff transit terms while similar goods imported through regular channels are subject to tariffs, such trade diversion would violate the MFN principle.
5. Mitigating Trade Diversion Risks
To mitigate the diversion of goods and ensure compliance with international law and trade agreements, Somalia must enforce strict safeguards within the transit agreement with Ethiopia. The risk of trade diversion is particularly high for Somalia, given the challenges its customs authorities face in effectively monitoring and controlling borders. Somali authorities must remain highly vigilant to ensure that transit goods imported to or exported from Ethiopian markets are not illegally diverted into Somalia’s domestic market, as this could undermine local businesses, diminish customs revenue, and violate international law and trade agreements.
To prevent goods in transit from being diverted for local consumption, the agreement should require Ethiopian goods to be clearly labeled [6] and registered as transit items. This should include customs seals and advanced tracking systems [7] to verify their transit status. A proven solution, such as Kenya’s Electronic Cargo Tracking System (ECTS), [8] can be used as a model to monitor the movement of transit goods effectively. Somali and Ethiopian customs authorities should collaborate to establish a similar system, ensuring continuous monitoring of goods from their entry into Somali ports or border customs to their exit at the Ethiopian border. This will ensure the goods do not enter Somalia’s domestic market.
Customs procedures should include tools like sealed containers, GPS tracking, and other advanced technologies to maintain goods in transit. To further minimize the risk of trade diversion, the agreement should mandate direct export and import routes supported by advanced tracking systems. Ethiopian goods passing through Somalia should be electronically tagged and closely monitored to prevent any diversion into the Somali market. For Ethiopian exports, Somalia must implement strong border controls to ensure the goods reach Somali ports without deviation.
Examples such as the Botswana-Namibia agreements demonstrate the value of detailed protocols, designated routes, and customs checkpoints in preventing trade diversion. Similarly, Kenya’s success with its ECTS offers a practical model for Somali and Ethiopian authorities to adopt, providing a reliable and transparent system for monitoring transit goods across borders.
A successful transit agreement between Somalia and Ethiopia must include provisions for customs cooperation. Somali and Ethiopian customs authorities should establish a joint customs platform that allows for real-time data sharing, enabling both sides to monitor the movement of goods and minimize the risk of illegal diversion. For instance, India and Nepal [9] have integrated their customs systems under their transit agreement, allowing for real-time data exchange and joint inspections. A similar arrangement should be part of the Ethiopia-Somalia agreement to reduce the chances of goods being diverted into Somalia’s market.
Furthermore, the agreement should establish a robust mechanism for regular reporting and joint reviews by Somali and Ethiopian authorities (further discussed below). This would monitor the implementation of the agreement, with a particular focus on preventing the diversion of transit goods into Somalia’s domestic market. Such monitoring would help identify and address issues early, enabling both countries to make necessary adjustments and ensuring Somalia’s compliance with international treaties and WTO obligations. By integrating these measures, Somalia can secure a sustainable, well-regulated transit arrangement that supports its trade interests and infrastructure development over the long term.
Moreover, the agreement must clearly define the penalties for non-compliance. To deter the intentional diversion of Ethiopian goods into the Somali market, the agreement should impose strict penalties, such as fines and the confiscation of goods, on traders or importers who attempt to bypass the transit rules. This will ensure that goods intended for transit do not unfairly enter the Somali market without the necessary duties being paid, thereby safeguarding Somalia’s adherence to preferential treatments under existing FTAs and RTAs, as well as ensuring compliance with the MFN principle, which mandates equal treatment for all trading partners not subject to preferential agreements.
6. Handling High-Risk Goods
Given the volatile security situation in the Horn of Africa, the transit agreement must include strict provisions for managing high-risk goods, such as arms, explosives, and illicit drugs. These goods pose serious security risks if not properly controlled, potentially exacerbating regional instability.
Somalia must maintain the right to conduct rigorous inspections of any goods transiting through its territory that could be classified as arms or explosives. While international standards allow for the transit of military equipment for legitimate purposes (e.g., military equipment for peacekeeping missions), Somalia should impose strict controls to prevent the illegal use of such goods.
The agreement should establish a framework for intelligence-sharing between Somali and Ethiopian law enforcement agencies to prevent drug trafficking. Somali authorities must retain the right to inspect any goods suspected of containing illicit substances. By working together, Somalia and Ethiopia can combat the smuggling of illegal drugs and other high-risk goods.
7. Protecting Somalia’s Coastline and Ecosystems
Somalia’s long coastline is one of its most valuable natural resources, and increased shipping traffic and port development could have significant environmental consequences. Somalia should demand that Ethiopia adheres to strict environmental regulations, ensuring that all activities related to port access and transit comply with international environmental standards.
8. Securing Transport Corridors
The security of transport corridors is essential to the success of the agreement. Given Somalia’s ongoing struggle with insurgent groups, the agreement should include provisions for securing Ethiopian goods while they are in transit. This might involve joint patrols, security convoys, or the establishment of secure trade zones along key routes.
Additionally, Somalia should consider implementing insurance mechanisms to protect Ethiopian goods from loss or damage during transit. Such provisions would reassure Ethiopian traders and investors that Somalia is a reliable partner, while also protecting Somalia from legal disputes arising from damaged or lost goods.
9. Resolving Dispute
Disagreements over transit rights, fees, or infrastructure responsibilities are inevitable in such agreements. Somalia must insist on including a robust dispute resolution mechanism that provides clear protocols for resolving disagreements quickly and fairly, without resorting to unilateral actions. The agreement should include provisions for joint committees to handle disputes and offer third-party arbitration if necessary.
10. Duration and Review Mechanism
Somalia should negotiate a transit agreement with Ethiopia that spans 50 to 75 years, providing the long-term stability needed to support substantial infrastructure investments while including mechanisms to adapt to evolving trade dynamics. Periodic reviews every 7-10 years should be built into the agreement, focusing on trade volumes, infrastructure conditions, and compliance with agreed terms. These reviews would allow for adjustments to tariffs, fees, or operational guidelines, ensuring the agreement remains relevant and effective. To protect both parties, the agreement should include provisions for early termination or renegotiation in cases of non-compliance or significant geopolitical changes, with a framework to compensate for any unamortized investments. This structure strikes a balance between long-term stability for investors and Somalia’s flexibility to address future needs.
Conclusion
While Ethiopia’s need for access to Somali ports presents economic opportunities for both countries, Somalia must approach these negotiations with caution. The agreement must safeguard Somalia’s sovereignty, while ensuring that the country benefits economically from facilitating Ethiopian trade. By prioritizing infrastructure development, preventing trade diversion, managing security risks, and protecting the environment, Somalia can craft an agreement that benefits both nations, while safeguarding its own sovereignty and national interests.
Footnotes:
[1]. The author is a Somali American lawyer based in Nairobi, Kenya, with extensive experience in international trade. He can be reached at [email protected]. He previously published “Somalia’s Accession to the East Africa Community: Legal Review, Opportunities and Challenges,” on November 24, 2023. See https://heritageinstitute.org/somalias-accession-to-the-east-africa-community-legal-review-opportunities-and-challenges/. See Bio at: LinkedIn.
[2]. https://wardheernews.com/the-ankara-declaration-and-its-implications-for-somali-sovereignty-and-regional-relations/.
[3]. The LAPSSET Corridor Program, https://lapsset.go.ke/.
[4]. Trade Facilitation, https://www.wto.org/english/tratop_e/tradfa_e/tradfa_e.htm.
[5]. Given Somalia's ambition to join the WTO, it is crucial to avoid violating any of the organization’s rules, particularly a fundamental principle like the MFN clause. Ensuring compliance with the MFN clause will not only strengthen Somalia's trade practices but also help it build credibility on the global stage, which is essential for successful WTO accession.
[6]. See, for example, Customs Convention on the international transport of goods under cover of TIR carnets (TIR Convention), https://unece.org/sites/default/files/2024-02/CELEX_02009D0477-20220625_EN_TXT.pdf.
[7]. Multi-REC Electronic Cargo Tracking System close to the end of its piloting test, https://www.ddcustomslaw.com/index.php?option=com_content&view=article&id=604:multi-rec-electronic-cargo-tracking-system-being-piloted-in-five-sadc-countries&catid=1:ultime&Itemid=50&lang=it.
[8]. Effect of Electronic Cargo Tracking Systems (ECTS) Implementation On Performance Of Customs And Border Control Department In Kenya; https://ikesra.kra.go.ke/server/api/core/bitstreams/1d4a6847-b493-44ac-9dc5-03e3876b5245/content.
[9] Free Trade Agreement Between His Majesty’s Government Of Nepal And The Government Of India; https://wits.worldbank.org/GPTAD/PDF/archive/India-Nepal.pdf.