Unpacking the EU–Vietnam Free Trade Agreement: Phased Impacts on Trade Creation and Trade Diversion

Purpose: This paper examines the phased impacts of the European Union-Vietnam Free Trade Agreement (EVFTA) on bilateral trade flows, with a particular focus on distinguishing trade creation (TC) and trade diversion (TD) effects across different stages of the agreement's implementation. Design/methodology/approach: This study applies a gravity model estimated with Poisson Pseudo-Maximum Likelihood (PPML) and robust fixed effects to Vietnam- EU trade data from 2001 to 2023, capturing the phased impacts of the EVFTA across proposed, negotiation, signing, and enforcement stages. Findings: The EVFTA significantly promotes TC among members, particularly during the proposed, framework signing, and enforcement stages. Minor disruptions during negotiation reflect institutional adjustments, but the over-all effects are positive. TD is limited, confirming welfare gains, that are consistent with dynamic trade literature. Research limitations/implications: The results highlight the need for early-stage legal alignment, transparent nego-tiation strategies, and transitional support to maximize FTA benefits. The dynamic and phased nature of impacts calls for flexible, long-term policymaking to sustain trade and investment growth. Originality/value: This study is the first to empirically evaluate the EVFTA's dynamic impacts across im-plementation phases, distinguishing TC and TC effects. It advances FTA research by applying dynamic estimation techniques to staged liberalization schedules, offering actionable insights for policymakers amid rising global uncertainties.