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Would this prevent us from requiring VW make available it's source code? Not a lawyer.

Germany is not part of the TPP, but assuming it were:

- probably not as a blanket precondition to allow them to sell cars,

- probably yes during the course of a trial if their cars were measured to have too strong emissions.

Not a lawyer either.

But think of all those millions of cars VW would sure love to sell in the USA via their soon to be founded Australian subsidiary...

Extrapolating this some more, might we even see a pattern emerging where some kind of clever legal offshoring could allow domestic companies to get a stronger position vs their own governments?

Yes. And this is actually one of the benefits of nation states signing the TPP!

Why would you want VW to make available its source code?

I believe the implication is that, if they were forced to release their source then either:

a) they would have been less likely to deliberately subvert the emissions tests in the code or

b) they were more likely to have been found out earlier.

Because stronger deterrence against cheating is needed. They got away with it for a very long time. Increasing the risks for cheaters is a rational change to make in light of that.

To audit the firmware of the emission control systems in their cars, for example.

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