The effects of the european union’s environmental regulations on the trade flows between Vietnam and the European Union

Abstract

When environmental protection becomes a global trend, international trade must adapt. Developed countries tend to have stricter environmental protection regulations, which are considered as a big obstacle for goods from developing countries. This study examines the impacts of environmental regulations of the European Union countries on the trade flows between Vietnam and the European Union countries. Using a dataset of 297 observations across 27 European Uinon countries from 2013 to 2023, our regression results show that the European Uinon’s environmental regulations positively affect Vietnam's imports from the European Union. However, these environment protection regulations do not significantly impact Vietnam's exports to the European Union countries. These research findings imply that the Vietnamese government should provide Vietnamese firms with strong support in developing sustainable development strategies focusing on technological innovation and enhancement of production capability. In addition, the government should issue stricter and more enforceable regulations on environmental protection to create pressure on firms so that they have to improve their production, follow green production trends and enhance their competitive advantages in the global market. Moreover, Vietnamese firms should upgrade their production technology with green, clean, and energy-optimized solutions to ensure that their production process and products are in compliance with the European Union’s standards. Vietnamese firms may proactively expand their communications and search for financial aid from green investment funds or similar organizations supporting sustainable production to save costs on green production. Then, they should actively develop and advertise environmentally friendly products to the European Union’s consumers in order to meet the trend of sustainable consumption in this high purchasing power area.