Reshaping Vietnam-EU trade: The EVFTA, innovation, and COVID-19


Authors

  • Vu Thi Phuong Mai Foreign Trade University
  • Cao Hai Van Banking Academy of Vietnam
DOI: https://doi.org/10.57110/vnu-jeb.v5i6.406

Keywords:

EVFTA, exports, trade patterns, COVID-19, global innovation, gravity model

Abstract

This study investigates the EU-Vietnam Free Trade Agreement's (EVFTA) impact on bilateral trade, considering global innovation and the COVID-19 pandemic. An extended gravity model incorporating the Global Innovation Index and a COVID-19 variable is employed. Results indicate a short-term negative EVFTA impact, potentially due to adjustment costs and non-tariff barriers, yet innovation positively influences Vietnam's high-tech exports. Despite COVID-19, Vietnam demonstrates trade resilience. Standard gravity variables (GDP, population, exchange rate, distance) reveal nuanced effects, highlighting Vietnam's GVC integration. This suggests that while initial EVFTA implementation poses challenges, innovation and adaptability drive long-term trade growth. Policies should focus on enhancing EU standards compliance, deepening GVC participation, and leveraging digitalization to maximize EVFTA benefits.

References

Anderson, J. E., & van Wincoop, E. (2003). Gravity with gravitas: A solution to the border puzzle. American Economic Review, 93(1), 170–192. https://doi.org/10.1257/000282803321455214

Anaman, K. A., & Al-Kharusi, L. H. S. (2003). An analysis of trade flows between Brunei Darussalam and the European Union. ASEAN Economic Bulletin, 20(1), 60–73. https://doi.org/10.1353/ase.2011.0025

Baldwin, R. (2006). Multilateralising regionalism: Spaghetti bowls as building blocks on the path to global free trade. The World Economy, 29(11), 1451–1518.https://doi.org/10.1111/j.1467-9701.2006.00852.x

Baldwin, R., & Lopez-Gonzalez, J. (2015). Supply-chain trade: A portrait of global patterns and several testable hypotheses. The World Economy, 38(11), 1682–1721. https://doi.org/10.1111/twec.12189

Baldwin, R., & Tomiura, E. (2020). Thinking ahead about the trade impact of COVID-19. Economics in the Time of COVID-19, 59. https://repository.graduateinstitute.ch/record/298220?ln=en&v=pdf

Baier, S. L., & Bergstrand, J. H. (2007). Do free trade agreements actually increase members' international trade? Journal of International Economics, 71(1), 72–95. https://doi.org/10.1016/j.jinteco.2006.02.005

Bergstrand, J. H. (1989). The generalized gravity equation, monopolistic competition, and the factor-proportions theory in international trade. The Review of Economics and Statistics, 71(1), 143–153. https://doi.org/10.2307/1928061

Blomqvist, H. C. (2004). Explaining trade flows of Singapore. Asian Economic Journal, 18(1), 25–46. https://doi.org/10.1111/j.1467-8381.2004.00180.x

Caballero-Morales, S.-O. (2021). Innovation as a recovery strategy for SMEs in emerging economies during the COVID-19 pandemic. Research in International Business and Finance, 57, 101396. https://doi.org/10.1016/j.ribaf.2021.101396

Crespo, N., & Fontoura, M. P. (2007). Determinant factors of FDI spillovers—What do we really know? World Development, 35(3), 410–425. https://doi.org/10.1016/j.worlddev.2006.04.001

Espitia, A., Mattoo, A., Rocha, N., Ruta, M., & Winkler, D. (2022). Pandemic trade: COVID-19, remote work, and global value chains. World Economy, 45(2), 448–487. https://doi.org/10.1111/twec.13117

European Commission. (2021). The EU-Vietnam Free Trade Agreement: Benefits and implementation guide. https://trade.ec.europa.eu/doclib/docs/2021/march/tradoc_159386.pdf

Filippini, C., & Moloni, A. (2003). The determinants of East Asian trade flows: A gravity model approach. Journal of Asian Economics, 14(5), 695–711. https://doi.org/10.1016/j.asieco.2003.10.002

General Department of Vietnam Customs. (2023). Vietnam's import and export statistics. General Statistics Office of Vietnam. https://www.customs.gov.vn

General Statistics Office of Vietnam. (2023). Vietnam's import and export turnover statistics 2010-2023. General Statistics Office of Vietnam. https://www.gso.gov.vn

Greene, W. H. (2018). Econometric Analysis (8th ed.). Pearson.

Grossman, G. & Helpman, E. (1989). Quality ladders and product cycles Quarterly Journal of Economics 104 (2), 557–586. https://doi.org/10.2307/2937947.

Grossman, G., & Helpman, E. (1991). Innovation and growth in the global economy. Journal of Political Economy 99 (4), 611–628.

Krugman, P. R. (1979). Increasing returns, monopolistic competition, and international trade. Journal of International Economics, 9(4), 469–489. https://doi.org/10.1016/0022-1996(79)90017-5

Medvedev, D. (2012). Beyond trade: The impact of preferential trade agreements on FDI inflows. World Development, 40(1), 49–61. https://doi.org/10.1016/j.worlddev.2011.04.036

Nguyen, B. X. (2014). The determinants of Vietnamese export flows: Static and dynamic panel gravity approaches. International Journal of Economics and Finance, 2(4), 122. https://doi.org/10.5539/ijef.v2n4p122

OECD. (2020). The impact of COVID-19 on global value chains. https://www.oecd.org/trade/

Petri, P. A., & Plummer, M. G. (2020). East Asia decouples from the United States: Trade war, COVID-19, and East Asia’s new trade blocs. Peterson Institute for International Economics Working Paper, 20(9). https://doi.org/10.2139/ssrn.3630294

Posner, M. V. (1961). International trade and technical change. Oxford Economic Papers, 13(3), 323–341. https://doi.org/10.1093/oxfordjournals.oep.a040877

Pöyhönen, P. (1963). A tentative model for the volume of trade between countries. Weltwirtschaftliches Archiv, 90(1), 93–100. https://www.jstor.org/stable/40436776

Rahman, M. M. (2003). A panel data analysis of Bangladesh’s trade: The gravity model approach. Bangladesh Development Studies, 29(1–2), 1–27. http://www.etsg.org/ETSG2003/ETSG2003_Programme_Mk1.htm

Rodrik, D. (2008). The real exchange rate and economic growth. Brookings Papers on Economic Activity, 2008(2), 365–439. https://doi.org/10.1353/eca.0.0020

Santos Silva, J. M. C., & Tenreyro, S. (2006). The log of gravity. The Review of Economics and Statistics, 88(4), 641–658. https://www.jstor.org/stable/40043025

Thai, T. D. (2010). Bilateral trade flows between Vietnam and European countries: A gravity model approach. ASEAN Economic Bulletin, 23(3), 238–252.

Tran, T. L., & Vo, M. V. (2019). Determinants of Vietnam’s export to the EU market. Accounting, 6(4), 421–424. https://doi.org/10.5267/j.ac.2020.4.0018

Tinbergen, J. (1962). Shaping the world economy: Suggestions for an international economic policy. The Twentieth Century Fund. https://repub.eur.nl/pub/16826/Appendices.pdf.

Tong, T. M. P. (2020). How new generation of trade agreements may help Vietnam in attracting more international investment and trade, and recovering faster after COVID-19. United Nations ESCAP. https://www.unescap.org/sites/default/files/77%20Final-Phuong%20Tong%20Thi%20MinhVietnam.pdf

Vernon, R. (1966). International investment and international trade in the product cycle. Quarterly Journal of Economics, 80(2), 190–207. https://www.jstor.org/stable/1880689

World Bank. (2020). World Development Indicators. The World Bank Group. https://data.worldbank.org

Wooldridge, J. M. (2013). Introductory Econometrics: A Modern Approach. Cengage Learning.

Downloads

Download data is not yet available.

Published

25-12-2025

Abstract View

9

PDF Downloaded

How to Cite

Vu Thi Phuong Mai, & Cao Hai Van. (2025). Reshaping Vietnam-EU trade: The EVFTA, innovation, and COVID-19 . VNU University of Economics and Business, 5(6). https://doi.org/10.57110/vnu-jeb.v5i6.406

Issue

Section

Original Articles