Tuesday, November 5, 2019

Fact Check: Is the AfCFTA the World's Second Biggest Free Trade Area?

African Continental Free Trade Area countries: Map of AfCFTA members and signatories as of October 2019. Who has signed the AfCFTA, who has ratified the AfCFTA, and who has not signed. Updated for 28th ratification by Mauritius. Colorblind accessible.
The AfCFTA is planned to cover almost all of Africa, but doesn't yet.
The recently-created African Continental Free Trade Area (AfCFTA) now has 28 full member countries, with 26 more signed on to the project as future members.

That's a lot of members for a free trade area, and everyone seems to be calling it the "world's biggest free trade area since the WTO". But is that label really accurate?

(If you don't want to read the whole article, scroll down to the conclusion for a short summary.)

Does the WTO count?

Let's get that WTO part over with first: The World Trade Organization (WTO), launched in 1995, is easily bigger than any other free trade area, covering most of the world with its 164 members, which together account for about $100 trillion in GDP (a measure of countries' economic size, here calculated according to the "purchasing power parity" method*).

On the other hand, the WTO was created not to promote trade between a specific group of countries, but to make trade cheaper and easier between all the countries of the world. So it doesn't really consider itself a free trade "area".

Map of World Trade Organization (WTO) member and observer countries, up-to-date as of 2019, labeling the two most recent members Liberia and Afghanistan, which joined in 2016. Colorblind accessible.
The WTO covers most of the world, with 164 full members (shown in dark red)
Some people even say regional free trade areas like the AfCFTA are sort of the opposite of the WTO, since they encourage members to trade with each other instead of with the rest of the world. But so far the WTO doesn't include all the world's countries, so in that sense it's still one giant free trade area that you can be either inside or outside of.

Assuming we do accept the WTO as a free trade area, does the AfCFTA come in second? Well, there are a few different ways we could measure that...


Number of Member Countries

Twenty-eight members is pretty big, but right now, the European Union's European Economic Area (EEA) still has more full member countries than than the AfCFTA, with a total of 30. And another EU-based grouping, the European Union Customs Union (EUCU), sort of has 32. The AfCFTA does have 54 "signatories" - countries that have signed on to join but haven't yet completed their membership - so if you're loose enough with your definition, you could say it has the two European areas beat. But as far as full, finalized members, it's not quite there yet.

Size of Member Countries' Economies

As far as total economic size, the AfCFTA has a long way to go before it can claim to be the world's second largest free trade area. After the WTO, the North American Free Trade Agreement (NAFTA) is the world's next biggest free trade area by economic size, with a GDP of about $25 trillion.

In contrast, the combined GDP for all of Africa - including countries that haven't signed on or completed their AfCFTA membership - is about $7 trillion (estimates of $2.5 trillion to $3.4 trillion in GDP for the future AfCFTA seem to be based on nominal GDP, not purchasing power parity*). Africa's economy is growing, and the pace is expected to pick up thanks to the AfCFTA - but it will still need quite awhile to catch up.

Combined Population

The AfCFTA also falls far behind if you measure size by the number of people living within the area's boundaries. India and China each have more people than all of Africa combined, and the Asia-Pacific Trade Agreement (APTA) includes both of them. That's probably the world's most populous free trade area, covering almost 3 billion people compared to Africa's current 1.2 billion. But the AfCFTA could eventually surpass it, since the fast-growing population of Africa is projected to reach almost 4.5 billion before the year 2100. China and India's population's are expected to level off and start shrinking long before then.

Total Land Area

But what if you measure the size of free trade areas by, well, actual area? Besides the WTO, the free trade area covering the most land area today is probably the zone created by the free trade agreement between the Eurasian Economic Union (EAEU) and China. It covers a total area of about 29.83 million square kilometers (11.5 million square miles) - not counting territorial seas or areas that are claimed but not controlled by its member countries.

Map of the Eurasian Economic Union (EEU), also known as the Eurasian Union. Includes new member Kyrgyzstan, as well as prior members Russia, Belarus, Kazakhstan, and Armenia, and disputed territory Crimea
The Eurasian Economic Union (EAEU), which together with trade partner China could be considered to form the world's biggest free trade area after the WTO by land size.
To reach that size, the AfCFTA will have to be ratified by every AU member country, including Eritrea, which hasn't even signed the agreement yet. Then it would clock in at 29.92 million sq. km., slightly bigger than the EAEU-China FTA. Without Eritrea, even the completed AfCFTA would fall just short of the EAEU-China area, at 29.80 million sq. km.

Then again, the EAEU-China deal is a pretty lightweight free trade agreement, and sort of a different type than the AfCFTA, since it's signed between one free trade area (the EAEU) and another country. If you only count normal multi-country free trade areas, the two biggest today are probably NAFTA and the ex-Soviet Commonwealth of Independent States Free Trade Area (CISFTA), each covering about 21 million sq. km. (8 million sq. mi.).

The AfCFTA will need quite a few more of its signatory countries to become full members before it can surpass those ones, but it should glide by eventually.

Future Competition

All this talk of the AfCFTA's future ranking assumes that no bigger free trade areas are created in the meantime - which is probably not a safe bet! For example, the proposed Free Trade Area of the Asia Pacific (FTAAP) could easily outsize the AfCFTA in area, passing 50 million sq. km. (about 20 million sq. mi.). It could also reach double the GDP of NAFTA, though it would still fall well short of the AfCFTA by member countries, even if we only count the ones that are already AfCFTA members today.

Asia's proposed Regional Comprehensive Economic Partnership (RCEP), already being called the "world's largest free trade deal" by news media, would also have a much larger total GDP than any of today's free trade areas - about $39 trillion, after India's withdrawal from the project. If India decided to rejoin, the RCEP would also beat the AfCFTA and other free trade areas by population, with some 3.4 billion people. But even with India, it would only cover about 22.5 million sq. km. (10 million sq. mi.), still leaving it smaller than a completed AfCFTA. And again, the RCEP's 15 or 16 member countries would be no match for the AfCFTA, even at its current total of 28.

Biggest Deal Made Since the WTO was Formed?

While "biggest since the WTO" might seem to imply that it's the world's second-biggest free trade area, maybe journalists actually mean the AfCFTA is the biggest free trade deal made in the years since the WTO was formed in 1995. In that case, maybe you would count all 54 signatory countries - since they all signed onto the deal - easily making it the biggest by number of member countries. It probably briefly topped the list by land area too, since the slightly-bigger EAEU-China FTA was signed a few months after the AfCFTA.

But by economic size or population, it still falls short. For example, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) has a GDP (PPP) of about $15 billion compared to Africa's $7 billion. It was signed two weeks before the AfCFTA, and came into effect six months earlier than Africa's deal. Meanwhile, the South Asian Free Trade Area (SAFTA), formed in 2004, covers a population of 1.6 billion people compared to Africa's 1.2 billion.

Conclusion

Even besides the WTO, the AfCFTA technically isn't yet the world's biggest free trade area by any measure. Once all its signatory countries ratify the treaty and become full members, it will probably have the most member countries, and could cover the most land area. You could also say that, by number of signatories or planned land area, it was the biggest free trade deal made since the WTO was formed in 1995. But by population or GDP (economic size) - which has been used to measure the size of other free trade areas - the AfCFTA doesn't even come close.


Editor's Note: This article has been updated since its original publication to include a paragraph on whether the AfCFTA was the biggest free trade deal to be signed since the WTO's formation in 1995.


Stay tuned to PolGeoNow for updates as the AfCFTA's number of full members grows! You can always check for the most recent version of our AfCFTA member map by viewing all AfCFTA articles on PolGeoNow.
 

See Also: What is the African Union, and which countries are in it?


*GDP, which stands for "Gross Domestic Product", is an estimate of the total sales value of all the things produced in a country, including services. It can be calculated in different ways, but in this article we've used "purchasing power parity", which for some purposes is more accurate than the basic "nominal" GDP. All comparisons made in the article still stand if nominal GDP is used instead.