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Pacific island strategic compacts: Ratification expected but still uncertain

Updated: Nov 22, 2023

Delayed negotiations and congressional approval process reveal an imbalance of power and asymmetric equities America’s closest Pacific island allies struggle to overcome



By Howard Hills

In a rare moment of bipartisan pragmatism, the U.S. House of Representatives Natural Resources Committee approved H.R. 96 with no amendments and by unanimous consent on Nov. 8. That bill would approve three international agreements renewing the Compact of Free Association between the U.S. and three freely associated states: Palau, the Federated States of Micronesia and the Marshall Islands.


The FAS are sovereign Pacific island nations located north of the equator in the far western Pacific, aligned with America in what has become a 75-year strategic alliance. The full House of Representatives and U.S. Senate appear ready to approve COFA renewal with urgency equivalent to the natural resources committee, due primarily to paramount U.S. national security interests in the Micronesian region since WWII. That includes vital strategic facilities for missile development since the 1950s at Kwajalein in the Marshall Islands, and the more recent TACMOR over-the-horizon radar installation in Palau.


Given China's provocations in the FAS intensified in recent years, it is no secret Beijing seeks political warfare not only to influence but ultimately to control Palau, the FSM and the Marshall Islands, politically and militarily. The presence of China's agents in each of the FAS, trying to disrupt and exploit delays in the approval of COFA renewal agreements, has been confirmed and added to the need for U.S. and FAS negotiations to end so the COFA renewal is secured.


In June, the White House Special Presidential Envoy for COFA Negotiations transmitted hastily crafted draft legislation for COFA approval. However, final agreements were not signed before the 20-year (FY2003-FY2023) COFA economic assistance package expired on Sept. 30.


This required the FAS governments to consider either borrowing and incurring sovereign debt, or making withdrawals from COFA Trust Funds established for FSM and the Marshall Islands at the behest of the U.S. State Department in 2003.


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The 2003 COFA Trust Funds were proposed by the State Department in contemplation of possible termination or insufficiency of U.S. grant assistance to meet FAS needs and ensure fiscal resiliency in the future. Averting that funding gap was imperative because Beijing was offering the Marshall Islands and Palau increased funding to induce a shift of alignment from the U.S. and Taiwan to China.


That made it pivotal when the last COFA agreements were signed by the U.S. and the Marshall Islands on Oct. 17. Despite overall close and friendly Marshall Islands-U.S. relations and stable COFA partnership, shifting U.S. interpretations of a 1986 settlement of the Marshall Islands' claims related to the Cold War -era U.S. nuclear testing program in the Marshalls created controversy. Especially contentious were claims over compensation paid to the Marshall Islands compared to Americans near U.S. mainland test sites, which delayed final agreements.

The Marshall Islands nuclear testing impasse was one of several issues in both the 2003 and 2023 COFA renewal negotiations linked to U.S. State Department proposals to phase out COFA features blending international and domestic U.S. programs under the U.N. trusteeship administered by the United States. This included State Department demands to control COFA funding and secure U.S. defense rights “in perpetuity,” even if U.S. economic assistance ended in the future.


Senior U.S. policymakers rejected most State Department sleight-of-hand interpretations of the COFA terms. Still, negotiations were delayed for two years to Beijing’s advantage, and overall COFA funding levels increased due to the added cost of reaching final agreements and ensuring ratification by FAS governments.


Now, with no apparent actionable differences so far between the House Republican majority, Senate Democrat majority and Biden administration, all three FAS should have received full levels of COFA funding under the second interim spending bill that prevented a government shutdown on Nov. 17.


Fortunately, it is reported FSM and RMI are fully funded under the new temporary spending law because anything less in the case of the Marshall Islands and the FSM would have rewarded those aligned with China interests pro-China opposition in those two COFA nations.


Although the Biden administration had agreed to fully fund Palau on the same FY 2024 schedule, there are reports Palau was not fully funded due to confusion about funding levels for Palau. This would give ammunition to the Pro-PRC leadership in the Palau national legislature to use against staunchly pro-COFA President Surangel Whipps.

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Anything less in the case of the Marshall Islands and FSM would have rewarded pro-China opposition in those two COFA nations. Although the Biden administration had agreed to fully fund Palau on the same FY 2024 schedule, there are reports of confusion about the inclusion of full funding for Palau. This would give ammunition to the Pro-PRC leadership in the Palau national legislature against staunchly pro-COFA President Surangel Whipps.


That would be perceived as a short-sighted blunder since the full 20-year COFA funding package of $7.1 billion, as proposed by the president’s 2024 budget, will include Palau if and when it is approved by Congress and signed into law as expected.


Neither a complete success story nor a saga of failure once finally accomplished, the expired COFA renewal process reflects the juridical nature of free association. After all, COFA is a terminable agreement under international law as defined by the U.S. and accepted by the FAS as long as the parties don’t determine better options exist.


Indeed, the COFA alliance is based on 75 years of U.S. needs for the strategic benefits of annexation without actual political annexation, in exchange for economic assistance. That has been the chosen alternative to constitutional integration and political union under U.S. sovereignty, with a guarantee of common American nationality and citizenship.


In contrast, Guam, the Northern Mariana Islands and the U.S. Virgin Islands so far have chosen to remain under U.S. sovereignty with unincorporated territory status. That means less than equal citizenship rights, limited application of the U.S. Constitution and statutory rather than constitutional U.S. birthright citizenship.


Only Puerto Rico has chosen democratically to transition into full equality of citizenship rights and permanent political union under statehood. But so far Congress has deferred and by not passing a self-determination act for Puerto Rico, forfeiting its authority and responsibility to resolve the status of that territory based on the anti-colonial tradition of the Northwest Ordinance.


Only the U.S. nationals of American Samoa currently seek no change in the political status or federal territorial relations that would disrupt local cultural rights and customary traditions.


Howard Hills served as legal adviser for Territorial Status Negotiations, Executive Office of the President and National Security Council (1982-1986), counsel for Free Associated State Affairs, U.S. Department of State (1987-1989), and Senior Adviser on Compact of Free Association Negotiations, Office of the Assistant Secretary of Interior for Territorial and International Affairs (2020-2023).



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