On February 4th, the U.S. Senate Appropriations Committee unveiled the National Security Supplemental Bill, also known as the border, foreign aid bill, to the public. While the bill provided funding for the conflicts in Israel and Ukraine along with new laws for border security, it did not include the compact renewals between the United States, the Federated States of Micronesia (FSM), Marshall Islands, and Palau. The omission of the compact renewals from the recent supplemental budget request is the latest in the series of chances that the United States missed in renewing the agreements.
Compact of Free Association
The Compacts of Free Association (COFA) are the result of the countries choosing to become states of free association with the United States over becoming U.S. commonwealths or territories in 1978. The nations and the United States signed the compacts in 1982, with the FSM and Marshall Islands approving them in 1985 and coming into force in 1986. However, the agreement between Palau and the United States was approved in the late 1980s and ratified in 1993, with it coming into force in 1994. The Compacts of Free Association (COFA) are the result of the countries choosing to become states of free association with the United States over becoming U.S. commonwealths or territories in 1978. The nations and the United States signed the compacts in 1982, with the FSM and Marshall Islands approving them in 1985 and coming into forsace in 1986. However, the agreement between Palau and the United States was approved in the late 1980s and ratified in 1993, with it coming into force in 1994.
The three countries can elect their own governments and establish diplomatic relations with other countries, such as sending ambassadors and embassies to other countries. They also have full leeway in developing their individual domestic policies. The citizens of the COFA states can freely live, travel, and work in the United States without visas. Citizens and the government can also access several federal programs and services, such as the Department of Education’s college assistance programs, Federal Emergency Management Agency, and various financial agencies. The three countries also use the U.S. dollar as their respective currency. Citizens of the three countries can also join the U.S. military, with at least 1,000 citizens serving in the U.S. military.
The agreement specifies that the United States will provide FSM, Marshall Islands, and Palau with economic assistance that must be renewed every 15 years. The economic assistance is in the form of annual budgets to assist in funding the COFA state’s government operations, including the building and expansion of public infrastructure and education, health, and social services. The United States is also responsible for protecting the countries from external and terrorist attacks. However, the United States has exclusive rights to ask for land to build and operate military bases and facilities in the countries through negotiations. They also prohibit any other military from accessing or building facilities on the islands without the United States’ permission.
The lack of the U.S. Congress passing the economic renewals negatively affects the ability of the COFA states to effectively run their countries. For example, the agreements with FSM and the Marshall Islands expired at the end of the fiscal year, in September 2023. The expiration means that both countries do not have funding and are unable to benefit from U.S.-based services. Congress did not include the supplemental when negotiating and passing the emergency funding for the U.S. government in October 2023.
The inclusion of them would have allowed both Micronesia and the Marshall Islands to continue receiving funding and accessing services. However, Palau’s agreement is set to expire in September 2024, but the amount allotted to them by the United States is lower since it is the agreement’s last year. This money is also supposed to be used to maintain facilities and related infrastructure for the U.S. military. The lower amount of funding also caused Palau to run a budget deficit for fiscal year 2024 that only compounded the amount of debt it currently holds.
The difficulty with the U.S. Congress passing the renewals allowed China to increase various operations the country uses to gain influence in the countries. One way is to use politicians, officials, and other important individuals under Chinese influence to push pro-Chinese narratives or rhetoric as well as question their country’s agreements and policies with the United States. China will also use affiliates of the Chinese state media or local news outlets to publish news articles or opinions with a pro-China narrative or support pro-Chinese politicians or officials.
The country will also use its embassy in Micronesia, Chinese businessmen, or criminals in these countries to bribe and harass local officials to further China’s influence. These operations were readily apparent in the Marshall Islands’ recent elections, where pro-Chinese elements attempted to interfere with the elections in favor of politicians favorable to China. However, Palauan President Surangel Whipps Jr. said that China attempted to influence various Palauan politicians, such as the House Speaker and President of the Senate. Whipps also said both the House Speaker and Senate President were “very supportive of China.” Furthermore, the presidents of the three COFA states sent a letter to the U.S. Senate in February 2024 saying that funding is needed for the agreements to continue. They also stated in the letter that the inability to pass the agreements allowed for “undesirable opportunities for economic exploitation by competitive political actors” to arise.
The reason why China wants to gain influence in the COFA states is to deny the use of the various islands to the United States and their allies in any potential conflict in the Pacific. China understands that the United States uses the COFA to build and maintain bases in the FSM, Marshall Islands, and Palau, which gives it strategic advantages due to their location in the Western Pacific. China also understands that the agreement also allows the United States to deny this valuable area to other countries since they would need the United States’ permission to build bases.
For example, the COFA allowed the United States to begin the construction of a Tactical Mobile Over-the-Horizon Radar site in Palau in late 2022. Micronesia also agreed to allow the United States to build a new military base on their territory in August 2023. The United States was allowed to build both bases due to the clause in the COFA agreement that gave the United States access to build the bases after negotiating with the nations. However, to truly comprehend the importance of the islands to any military plans, one must look back at the Pacific Theater of World War II.
During the war, the United States fought Imperial Japan for islands, such as Enewetak Atoll (Marshall Islands), Majuro (Marshall Islands), and Peleliu (Palau), to use them as staging or logistical centers for future campaigns. The United States also took over other islands adjacent to the COFA states, such as Guam (Mariana Islands), Tinian (Mariana Islands), Makin, and Tarawa (Kiribati), as additional bases and to secure air and sea lines of communication. However, China studied the United States’ advance during the Pacific campaign and understood that, like Imperial Japan, the country would also need to build bases in the region. The country made some efforts to get access to ports in Kiribati and the Solomons, but they understand that they would need facilities in the Western Pacific to complicate any U.S. and allied planning.
China attempted to increase relations with countries in the region as a first step to eventually build or refurbish sites in the region for use. In 2022, China failed to get ten South Pacific countries to sign the China-Pacific Island Countries Common Development Vision. The failed attempt occurred during the 2nd China-Pacific Island Countries Foreign Ministers’ Meeting held in Fiji in May 2022. The reason why it failed is because some, such as the FSM and Niue, voiced their opposition to the agreement or wanted more time to review it due to the regional interests it covered. However, China likely views Micronesia, the Marshall Islands, and Palau as appropriate and logical next step due to the U.S. Congress’ repeated failures to pass the COFA renewals.