Details of Compact talks kept under wraps. Will Palau play hardball with US?
Updated: May 9, 2022
By Mar-Vic Cagurangan
The United States and Palau have resumed the discussion on the expiring provisions of the Compact of Free Association amid growing geopolitical tension in the region that underscores the Pacific nation's strategic role in U.S. homeland security.
Ambassador Joseph Yun, special presidential envoy for compact negotiations, met with Palau President Surangel Whipps Jr. in Washington D.C. last week. Officials, however, declined to provide details of the preliminary talks.
Ned Price, spokesperson for the State Department, said Yun and Whipps "had a warm and constructive introductory meeting in which President Whipps explained Palau’s current and long-term economic challenges."
This was the first compact meeting between the U.S. and Palau since Yun was appointed in March.
“They also discussed the role of the compact in Palau’s economy and the broad and strong relationship between the two countries,” Price said.
Whipps did not respond to the Pacific Island Times’ request for an interview.
The economic provisions of the treaty between the U.S. and Palau will expire in September 2024.
“While we cannot comment on the specifics of ongoing negotiations, President Whipps and Special Presidential Envoy Yun emphasized the importance of the Compact of Free Association and expressed their mutual desire to reach agreements that will benefit both countries,” Price said.
Price said Yun “conveyed the strong desire of President Biden to continue and build upon the strong relationship between Palau and the United States.”
Seeking to outpace China in the Indo-Pacific region, the U.S. plans to develop a new radar station in Palau that will close surveillance gaps for the U.S. Indo-Pacific Command theater.
Recognizing Palau’s strategic importance to the U.S. homeland security, Whipps is expected to play hardball with the U.S. in terms of negotiating a new deal.
“The U.S. very much needs Palau in terms of security and defense,” Whipps said in a March 29 interview with RNZ. “I think the intent of the United States is this relationship needs to continue. It should not be severed. If anything, it needs to be strengthened.”
Whipps expressed his dissatisfaction with what Palau currently receives from the U.S. under the compact.
“We have economic assistance from the U.S. and from the beginning, (which) was never adjusted for inflation. So, we have serious challenges with the current economic assistance,” the president told RNZ. “I think part of what we need to be talking about with the U.S. is not only defensive security, but economic security, economic resilience and that is really our challenge going forward.”
The compact includes a section for "Palau Military Use and Operating Rights Agreement," which authorizes the U.S. to use the nation’s water, air and land in exchange for economic assistance and the Palauan citizens' unrestricted entry to the U.S.
He also raised concerns that “Palau has become the bullseye" as a result of the U.S. military’s plan to build radar systems in the nation. "We are at the tip of the spear," he added.
During the preliminary talks, Whipps and Yun agreed to “focus on negotiating agreements to provide economic assistance, including certain federal programs and services," Price said.
According to the Government Accountability Office, the U.S. Department of the Interior provided Palau with approximately $574 million between 1995 and 2009 “for assistance to the government, contributions to a trust fund, construction of a road and federal services.
“On Sept. 19, 2018, the Compact Review Agreement entered into force, extending a variety of recurrent funding through FY 2024—for example, funding for infrastructure maintenance,” GAO said in a report released in February. “Palau relied on compact grants as well as disbursements from its compact trust fund for 13 percent of expenditures in FY 2019."
“President Whipps and Special Presidential Envoy Yun decided to meet again soon to continue the discussions on COFA. Dates will be confirmed in due course,” Price said.