The tariff-jumping motive for FDI is well developed in the literature. The trade-of foreign firms typically face in these models is based on the level of the tariff when exporting versus the boardcest associated with setting up a manufacturing plant abroad. Other studies compare the effects of tariffs with the effects of quota and voluntary export restraints (VERs) and have shown how the profit gain for foreign firms due to VERs lowers the propensity to engage in FDI.
White the use of tariffs, quota and VERs has been reduced as a result of multilateral trade negotiations, the use of other trade policy instruments, notably antidumping, has increased. Recent empirical work has confirmed that the FBI response to antidumping actions is certainly not uncommon, in particular in case of antidumping actions targeting Japanese firms, in a recent study, analyses duty-jumping FDI by firms based in other countries than Japan. The antidumping jumping FDI is very limited in scale in case firms without international experience based in developing countries are targeted. Given the demonstrated importance of FDI responses to antidumping actions, it is surprising that the theoretical literature on the effects of antidumping law have by and large ignored the issue of antidumping jumping. In a symmetric model of two countries considering reciprocal (anti-)dumping and reciprocal FD1, they find that producers in both countries would gain from the abolition of antidumping law from the WTO statute. This result is driven by the fact that reciprocal antidumping jumping FDI increases competition and reduces profits of domestic firms.
All types of international price discrimination with the lower price charged in the EH can classify as dumping, at least for products for which there are close EU substitutes. We explicitly consider a clause in EU antidumping law that allows the EU administration to settle antidumping actions either by levying duties or by demanding price undertakings from the foreign exporting firms. Our medel shows that this decision will depend on the objective function of the EU administration, which may vary between protecting the interests of EH industry only (maximizing producer surplus) and also taking into account the interests of consumers and user industries (maximizing EU social welfare). The former corresponds to the direct objective of antidumping law. Pursuing the latter is in line with the public interests’ embedded in EU antidumping law by which the EU Commission is held to consider repercussions on consumers and user industries. A second aspect of EU antidumping incorporated in the model is that the level of duties and price undertakings is typically determined by the degree to which foreign firms undercut EU producers’ prices on the EU market. This rule is applied to ensure that antidumping measures remove the injury to EU industry. The rule limits the discretionary power of the EU administration in determining duty and price undertaking levels.
Contrary to the symmetric model of Haland and Wooton, we explicitly take on boardcost asymmetries, viz, a cast advantage of the foreign firm. Such a cost advantage is a most likely reason for price undercutting by foreign exporters resulting in antidumping actions. We allow cost advantages to ha either ’firm-specific’, in which case they are internationally transferable through FDI, or ’location specific’. We show that the occurrence of duty ,jumping FDI in the EU requires that the foreign firm’s cost advantage is at least partly firm specific. In the next section we present the model for the case of products which are sufficiently close substitutes (’like’ products) and firm-specific cost advantages, assuming that the EU administration is able to commit to antidumping actions before the foreign firm’s investment decision, and allowing two alternative policy objectives (producer surplus and social welfare).
For this purpose we used a three-stage model. In the first stage, the EU administration decides whether to take antidumping measures, and if so, whether to levy a duty or allow a price undertaking. In the second stage the foreign firm decides whether to serve the EH market through export or FDI. In the third stage, the foreign firm is engaged in price competition with a local firm on the EU market, which offers close substitute products. Injury arises from a production cost advantage of the foreign firm, which may either be location specific, for example, based on lower foreign wages or firm specific like based on a transferable technological advantage.

What does the writer imply in the fourth paragraph（）