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U.S. Compact of Free Association In West Pacific

U.S. Compact of Free Association With Pacific States

U.S. Department of State Bureau of East Asian and Pacific Affairs December 6, 2001

Statement of Albert V. Short Negotiator for the Compact of Free Association Before the Committee on Energy and Natural Resources U.S. Senate December 6, 2001

Mr. Chairman and Members of the Committee:

Thank you for this opportunity to testify on the Administration's position and goals in ongoing Compact negotiations with the Federated States of Micronesia (FSM) and the Republic of the Marshall Islands (RMI).

I would like to begin by noting that although I recently assumed the responsibility of Negotiator, you will see that our basic approach to these negotiations has not changed. I am honored to outline the priorities of President Bush in the negotiations. The context for the current effort to renegotiate the expiring provisions of the Compact demands that the Administration realign U.S. priorities. Our past efforts have been successful in fostering a political transition from Trust Territory Administration to stable, self-governing democracies in the Freely Associated States (FAS). We are now facing a similar, critical challenge -- effecting the economic transition toward increased budgetary self-reliance. I will work hard to assure that future U.S. assistance will be used effectively to meet the object of Title Two of the Compact: "to assist the RMI and FSM in their efforts to advance the economic self-sufficiency of their people."

As you know, Senators, the relationship of free association is not up for renegotiation. This special tie with the Marshall Islands and the Federated States of Micronesia continues indefinitely. Only Title Two (Economic Relations) which provides for U.S. financial and program assistance, and Title III, which contains, inter alia, the so-called "defense veto" and provisions regarding additional base rights, are subject to renegotiation. Two other important defense provisions -- the United States' right of "strategic denial" and the agreement to use Kwajalein -- are not among the expiring provisions. Under the Compact and the Guam Omnibus Opportunities Act, an extension of U.S. assistance for FY 2002 and FY 2003 is currently in effect.

In the wake of the September 11th terrorist attack on the United States, I have reemphasized to the FSM and the RMI the need to examine our immigration procedures to ensure that the security and safety of both our people are safeguarded and terrorists are apprehended and shut down. Accordingly, the United States will continue to review the desirability of amending the migration provisions of the Compact in the negotiations, even though they are not among the expiring provisions.

There are four things I hope to accomplish today: 1) present our assessment of the Compact to date, 2) discuss the goals of continued U.S. assistance, 3) provide an update on the negotiations, and 4) share with you our general approach to the negotiations.

I. Assessment of the Compact

The Administration shares the view of the GAO that the Compact has successfully met its primary goal of providing for a stable transition from the United Nations Trusteeship to sovereign self-government. At the same time, the Compact has protected U.S. security, maritime, and commercial interests in the Pacific by assuming defense responsibilities for the vast sea and air space of the Freely Associated States and by maintaining a missile testing site at Kwajalein Atoll in the Marshall Islands.

The Compact has been successful in transforming the relationship between these islands and the United States from one of trust Administrator and ward to being among our closest bilateral relationships and among our staunchest friends in the United Nations. These achievements are solid and lasting, in my opinion, and the American and FAS people can be rightly proud of them.

However, the past 15 years have also recorded the lack of accountability and the ineffective use of U.S. economic assistance. Therefore, the principal task of our negotiations is to improve the effectiveness and accountability of U.S. assistance and to develop a strategy for ending the annual payments by the United States to these countries. These are the key priorities of this Administration.

Finally, the past 15 years have ushered in an era of increased impact on the health, education, and welfare programs of U.S. jurisdictions in the Pacific because some migrants from the Freely Associated States have come with low work skills, poor health, and dependent children. The Administration will address the need to reimburse U.S. jurisdictions for the added costs they bear in honoring our commitment on migration to the FAS people. I should note that every new arrival in our country imposes costs on our communities by drawing on social services. But, many arrivals also add to our economy and pay taxes that support those public services. Many FAS arrivals to the U.S. come with job skills, work hard like any American, spend money here, and pay U.S. taxes. Their contribution should not be ignored or forgotten in reaching an understanding of the impact of migration on U.S. jurisdictions.

Just as importantly, these migratory flows follow established trade and business routes. U.S. business looms large in the trade and commerce of the Freely Association States, earns money for many U.S. companies, and reinforces our special relationship.

II. The Goals of Compact Assistance

The United States has strong interests in these countries which justify continued economic assistance. These interests include:

-- Maintaining economic stability. (In this regard, we believe the United States should continue its commitment to the economic strategies that the RMI and FSM have developed with the support of the United States, the Asian Development Bank (ADB), the International Monetary Fund, and our partners in the ADB Consultative Group, including Japan and Australia); -- Improving the health and social conditions of the people of the RMI and FSM; -- Sustaining the political stability and close ties which we have developed with these two emerging democracies; -- Assuring that our strategic interests continue to be addressed; and -- Developing a strategy for ending annual payments by the United States by the end of the next Compact funding term.

We recognize that too sharp a reduction in U.S. assistance at this stage of economic development of the RMI and the FSM could result in economic instability and other disruptions, and could encourage an increase in the level of migration to the United States by citizens of those countries. We continue to believe that maintaining substantial financial and other assistance will help to assure economic stability while the RMI and FSM continue to implement economic development and reform strategies.

III. Update on the Negotiations

We continue to negotiate with the FSM and the RMI separately. In general, the talks with the FSM are progressing well. We have had three negotiating sessions with the FSM, and the fourth round will be held next week. During our December session, I hope to present several subsidiary agreements involving programs and services of the U.S. Postal Service, Federal Aviation Administration, Federal Deposit Insurance Corporation, and the Department of Defense. More importantly, I intend to lay the groundwork for the presentation of a U.S.-proposed Compact text early next year. I am encouraged by President Falcam's personal commitment to make upcoming talks as successful as possible.

Formal talks with the RMI were delayed by a governmental change following elections in November 1999. We are pleased that President Kessai Note was able to visit the U.S. in November of this year and to confirm his administration's readiness to present its proposal on Compact assistance. We received the Marshall Islands proposal on November 30 and look forward to exchanging views on it during our upcoming third round, scheduled for next week. I am impressed by the serious commitment of President Note and his cabinet to uphold good governance, transparency, and accountability.

IV. Our Approach to Negotiations

To meet the priorities outlined above, the negotiating approach of the Administration has four main elements:

-- Financial assistance; -- A trust fund as a mechanism to allow for the end of U.S. annual financial assistance at the end of the next Compact funding term; -- U.S. federal services and program assistance, and -- Modifications to the current migration provisions.

Financial Assistance. There must be more effective accountability with respect to future U.S. economic assistance to the FSM and the RMI. It is time to stop pass-through funding in favor of assistance with accountability. In the future, we believe that financial assistance should no longer be made available through transfers that co-mingle U.S. funds with local funds, thereby rendering it difficult to track and monitor their use. Instead, we believe that future funds should be provided through targeted, sectoral assistance, each with clearly defined scope and objectives.

We have proposed to the FSM and RMI that any future financial assistance be aimed at six sectors:

-- Health; -- Education; -- Infrastructure; -- Private sector development; -- Capacity building/good governance, and * The environment.

Built into each sectoral goal would be regular planning, monitoring, and reporting requirements. The Administration is also seeking the necessary authority and resources to assure effective oversight and reasonable progress toward the agreed objectives.

Trust Fund. The Administration believes that a major goal of the new Compact provisions should be to terminate annual payments to the FSM and the RMI by a date certain. In its initial proposals to the U.S., both the FSM and RMI anticipated the U.S. interest in the eventual termination of mandatory annual financial assistance by proposing that the U.S. capitalize a trust fund over the next term of Compact assistance. The two Freely Associated States proposed that U.S. mandatory annual financial assistance be terminated at such time as the fund generates sufficient revenue to replace the mandatory annual assistance.

Like the FSM and the Marshalls, the Administration is interested in the concept of using a trust fund to support our objective of terminating annual financial assistance. We are still analyzing what the appropriate trust fund balance and level of funding would be. The Administration has not yet determined what restrictions should be placed on any such trust funds, or what level of contributions should be anticipated from foreign sources.

Congress has previously authorized and funded the use of trust funds to achieve similar objectives, including one established under the Compact with the Republic of Palau, and three established in the Marshall Islands as a part of the United States' compensation for the U.S. nuclear weapons testing program.

Federal Services and Program Assistance. I respectfully submit that Federal program coordination under the existing Compact is ineffective. We are still considering how these important functions could best be carried out.

I believe some U.S. Federal services should continue for the same term as the next Compact period. Generally, these services are targeted to priority economic objectives such as weather monitoring, supporting the postal system, and assuring safe air transportation. Nevertheless, in order to move toward our goal of greater self-reliance, we are exploring the establishment of a policy that no new Federal program would be extended to the FSM and RMI unless an assessment is first done of its potential to advance the goal of economic self-sufficiency. To the same end, we are considering a policy whereby the Administration would annually recommend to Congress actions that could be taken to increase the effectiveness of U.S. program assistance, including the possible consolidation of federal programs that might be duplicative. Such grant consolidation authority exists for federal programs operating in the U.S. territories.

Migration. In the wake of the September 11th attack, we are reexamining section 141 of the Compact. This section provides that citizens of the RMI and FSM "may enter into, lawfully engage in occupations, and establish residence as a nonimmigrant in the United States." Our examination has led us toward establishing passport or other documentary requirements for Micronesian migrants to the U.S. in an effort to halt the entry of inadmissible people such as terrorists who might seek to exploit this route of entry into the U.S. In support of this effort, we are using our regular government-to-government consultations to review specific migration issues and procedures.

Section 104(e) of the Compact requires the President to report annually to Congress on the impact of the Compact. The annual reports and a recent GAO study document the substantial impact of FAS migration to the States of Hawaii, Guam, and the Commonwealth of the Northern Mariana Islands (CNMI). Of particular concern are migrants who have communicable diseases, criminal records, or are likely to become a public charge as a result of chronic health or other problems. These conditions are currently all grounds for inadmissibility to the United States under the Immigration and Nationality Act.

One way to address the issue of Compact impact on Hawaii, Guam, and the CNMI is to increase the compensation to those jurisdictions for the negative impacts of migration, as authorized by section 104 of the Compact. This solution, while helpful, would not decrease the adverse impact of migration from the RMI and the FSM. It would, instead, shift the cost burden to the U.S. Government.

Compact impact can also be addressed, in part, through our plan to commit a substantial portion of future U.S. assistance through sectoral assistance to improve the general health and education of citizens of the FSM and the RMI. We believe that improving the quality of life in the FSM and the RMI will reduce the incentives for citizens of those countries to migrate to the United States. Further, it would ensure that those persons who do migrate would be healthier and better educated, and therefore in a better position to contribute to the communities where they choose to live within the United States.

In conclusion, we are considering three new responses to the migration issue.

First, we are looking at ways to provide compensation to Hawaii, Guam, and the CNMI for the negative impacts of migration, as authorized by section 104 of the Compact.

Second, we are exploring various mechanisms for improving our ability to ensure on a timely basis that RMI and FSM migrants to the United States are eligible for admission.

Third, we believe our approach of committing a substantial portion of U.S. assistance during the second Compact term to improve the health and education of potential migrants from the FSM and RMI can significantly reduce Compact impact.


Thank you for this opportunity to present the Administration's views on the progress and challenges in the Compact negotiations. Let me assure you that we welcome any and every opportunity to keep the Committee informed as these negotiations advance.


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