There are several reasons why Ethiopia’s port agreement with Somaliland is aimed at strengthening its participation in the international trade system:

1. Diversification of trade routes: Ethiopia is a landlocked country and heavily relies on Djibouti’s ports for its international trade. However, having access to Somaliland’s port of Berbera provides an alternative route for Ethiopian exports and imports. This diversification reduces dependency on a single trade route and enhances Ethiopia’s resilience in the face of potential disruptions.

2. Expansion of export opportunities: Ethiopia has been experiencing rapid economic growth in recent years, and its exports have been increasing. However, the limited capacity of Djibouti’s ports has been a bottleneck for further export expansion. By utilizing Somaliland’s port, Ethiopia can increase its export capacity and tap into new markets, thereby boosting its participation in the global trade system.

3. Reduction of transportation costs: Currently, Ethiopia has to transport its goods overland to Djibouti, which adds significant transportation costs and time. The agreement with Somaliland allows Ethiopia to access a nearby port, reducing transportation costs and improving the competitiveness of its exports in the international market.

4. Development of regional integration: The port agreement with Somaliland is part of Ethiopia’s broader strategy to enhance regional integration in the Horn of Africa. By strengthening trade ties with Somaliland, Ethiopia aims to promote economic cooperation and stability in the region. This can lead to the development of regional value chains, increased investment, and improved connectivity, all of which contribute to Ethiopia’s participation in the international trade system.

5. Geopolitical considerations: The port agreement with Somaliland also has geopolitical implications. It allows Ethiopia to reduce its reliance on Djibouti, which has been a source of tension in the past. Additionally, it provides Ethiopia with a strategic foothold in the Red Sea region, enhancing its influence and presence in the international trade system.

Overall, the port agreement with Somaliland is a strategic move by Ethiopia to strengthen its participation in the international trade system. It diversifies trade routes, expands export opportunities, reduces transportation costs, promotes regional integration, and has geopolitical advantages.