Analysing Relations Between Fsm Palau And The US Politics Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

The Compact of Free Association and what it means in terms of economy, political relationship, security and immigration between the Federated States of Micronesia (FSM), Republic of Palau (RoP) and the United States.

History of FSM and Palau

The Caroline Islands (known as Micronesia) was sold to Germany and after World War I, the League of Nations gave Japan a mandate over the islands. Japan developed the mining industry, fishing and agricultural (particularly sugarcane) domains. After the World War II and the defeat of the Japanese empire in the pacific, Micronesia was released from the Japanese occupation and became known as the Trust Territory of the Pacific Islands. The United Nations created the Trust Territory of the Pacific Islands (TTPI) in 1947. The island of Ponape, Truk, Yap, Palau, Marshall Islands and the Northern Mariana Islands, together constituted the TTPI. The United States accepted the role of Trustee of these islands, the only United Nations Trusteeship to be designated as a "Security Trusteeship," whose ultimate disposition was to be determined by the UN Security Council. As a trustee, U.S was to promote the economic advancement and self-sufficiency of these islands. The U.S president appointed a High Commissioner who appoints administrators to each of the islands. Micronesia remained under the TTPI under the naval department until 1951. In 1969, U.S offered Micronesia a commonwealth status but was rejected by all islands except the Marshall Islands.

On July 12, 1978, following a Constitutional Convention, the people of four of the former Districts of the Trust Territory, Truk Yap, Ponape and Kosrae voted in a referendum to form a Federation under the Constitution of the Federated States of Micronesia (FSM). Palau decided to break away from the convention and formed its own negotiation separate from FSM. United Nations observers certified this referendum as a legitimate act of self- determination. The idea of free association was introduce during the 1978 convention by chairman, Lazarus Salii of Palau.

Why the Compact of Free association?

Palau and FSM recognized that their previous relationships with other nations were based solely on occupations instead of association. The Spaniards came first, then Germans who sold it to the Japanese and now the U.S. Palau and FSM wants a government and its international relationships to be founded upon respect for human rights and fundamental freedoms for all, and that the peoples of the Trust Territory of the Pacific Islands have the right to enjoy self-governing that is mutually beneficial through free and voluntary associations of their respective Governments. These two Nation recognized their common desire to terminate the Trusteeship and establish a new government-to-government relationship each of which is in accordance with a new political status based on the freely- expressed wishes of its peoples of the Trust Territory of the Pacific Islands that is appropriate to their particular circumstances. Finally, they recognized that the peoples of the Trust Territory of the Pacific Islands have and retain their sovereignty. Their sovereignty right to self-determination, inherent right to adopt and amend their own Constitutions and to form a government that is approved by the peoples of the Trust Territory of the Pacific Islands constitutes an exercise of their sovereign right to self-determination under the Free Association concept. This was the wish of its people; therefore, it must be done. Palau and FSM through arduous negotiation and numerous conventions achieved a Freely Associate States with United States.

The Compact of Free Association

The people of Palau and the Federated States of Micronesia (FSM) acting through their duly elected government established under their constitution are self-governing. In short, the Compact of Free Association (COFA) is as follows:

The Compact of Free Association between the Republic of Palau (RoP) and the United States entered into force on October 1, 1994, with the U.S. interest of promoting Palau's self-sufficiency and economic advancement. The compact and its related subsidiary agreements established a 15-year term of economic assistance and specified security and defense relations between Palau and the United States. The agreement also requires Palau to submit economic development plans every 5 years, as well as annual reports on, among other things, its implementation of these plans. The COFA agreement also requires the U.S and Palau governments to hold annual economic consultations to review Palau's progress toward self-sufficiency. Furthermore, the compact's subsidiary trust fund agreement requires the U.S. and Palau governments to consult regarding Palau's trust fund every 5 years thereafter. The Department of the Interior's (Interior) Office of Insular Affairs (OIA) has primary responsibility for monitoring and coordinating all U.S. assistance to Palau, and the Department of State (State) is responsible for government-to-government relations.

The Compact of Free Association between the Federated States of Micronesia (FSM) and the United States follows almost the same patterns as Palau Compacts. However, it was established before Palau started it negotiation with the United States. U.S. Provides economic assistance (including eligibility for certain U.S. federal programs), defense of the FSM, and other benefits in exchange for U.S. defense and certain other operating rights in the FSM, denial of access to FSM territory by other nations, and other agreements. The Compact of Free Association between the Federated States of Micronesia and the United States was initiated through negotiations in 1980.

The Compact was approved by the citizens of the FSM in a plebiscite held in 1983.  Legislation on the Compact was adopted by the U.S. Congress in 1986 (see above for citations) and signed into law on November 13, 1986.

The Concept of Free Association

What is the concept of this new developed idea of "Free Associations"? This concept really has no proper definition other than being free to conducts and controls its nation's boundaries. In other word, a sovereign Nation, a separate State governs by its constitution. In addition, an association does not need to be called associations in order to provide similar benefits (I.e., Puerto Rico, Northern Marianas Island or Guam). This concept of relationship can explore a wide range of possibilities that are available within the political communities that are seeking certain benefits of sovereign statehood but unwilling or unable fully to bear its burdens. An association is formed when two states of unequal power voluntarily establish durable relationship (associate). One state, the associate, delegates certain responsibilities to the other, the principal, while maintaining its international status as a state. Free associations represent a middle ground between integration and independence.

After the World War II, United States offered the status of United States territory to each jurisdiction. However, FSM and RoP rejected that status in favor of a different relationship involving greater local autonomy but retaining strong ties with the United States. While this concept of "free association" has no precise definition in international law, it is recognized in resolutions of the United Nations General Assembly as an appropriate political alternative to independence or metropolitan (territorial) status for political entities emerging from a colonial or trusteeship status. The concept of free association as defined and agreed by the U.S. and Micronesia in 1978, was in essence a degree of external sovereignty was freely exchanged in return for a defense commitment and the promise of significant economic assistance.

Through this concept of Free Association, FSM and Palau can achieve its internal self-government while the U.S. maintains full authority and responsibility for defense and security matters. Furthermore, FSM and Palau have full authority and responsibility for its own foreign, domestics and sovereignty affairs but must collaborate with the U.S before taking any action that might be in conflicts with U.S foreign affairs. The United States concluded Compacts of Free Association with the Governments of the Federated States of Micronesia in 1982 and the Republic of Palau in 1986. These two Nation started their arduous journey toward their

The Promise of the Compact

The promises of the Compact of Free Association came when the two Nations were struggling to meet their poor to worst economy of the decade. The promises of the Compact to the Federated States of Micronesia and Palau were economy, Immigration, security and political relationship with the U.S, to say the least.

Under the promise of Economy to FSM, the Government of the United States shall provide on a grant basis during the next 15 years to FSM. The first payment of sixty million dollars annually for five years will start from the date of the approved compact. Fifty one million dollars thereafter for five years and the final grant payment of forty million dollars for the last 5 years. The United States will provide program assistance, like the weather services, emergency management agency, postal organization, federal aviation administration, education and health care. Under the education and health program, the FSM will receive an amount of $10 million, which will support the areas of education and health. Furthermore, every citizen of the FSM who are pursuing a higher education can apply for Federal Aids or student loans from the U.S government. FSM and the U.S established a trade agreement between each other. All export and import to the U.S shall be treated with respect to all imports and exports from other countries. Products will be subjects to all regulations of taxations, exportation, importation, sales and distribution. For example, in order for FSM products to be imported into the U.S, U.S agreed to treat all products from FSM as an insular possession of its government.

The promise of economy to Palau is a little different from that of FSM. A 15-year term of budgetary support for Palau includes direct accounting assistance, operations and maintenance, and for specific needs such as energy production, capital improvement projects, health, and education. The economic assistance requires the United States to set up a trust fund for Palau. U.S will build a road around the whole Island of Palau before the Compact expires in 2009. The total cost of the projects is $825 million. This road became known as the "Compact road". Another project was to move Palau's capital to the center of the Island. The project was to move and build Palau capitol identical to the U.S capitol in D.C. This project took 3 years to complete and cost the U.S $10 million. Furthermore, Compact federal services identical to FSM requires the United States to make available certain federal services and related programs to Palau, such as postal, weather, and aviation services. In addition to the federal programs, services agreement of legal status of programs and related services, federal agencies, U.S. contractors, and personnel of U.S. agencies were established and implemented. Finally, the accountability program for the Compact fund between Palau and U.S was created. Palau needed the help of the U.S to help account by means of outside auditors for all grants awarded to Palau.

The promises of Immigration for the two Nations are very different but similar in some areas. FSM immigration clearly states that any person who acquires the citizenship of the Federated States of Micronesia, at birth, or on the effective date of the respective compact has become a citizen of the FSM may enter lawfully and engage in occupations, and establish residence as a non-immigrant in the United States and its territories and possessions. The person or persons are considered to have the permission of the Attorney General of the United States to accept employment in the United States.

On the other hand, immigration status of the Palauan citizen is a little different from that of the FSM. Palauan citizens are not citizens or nationals of the United States. Citizens of Palau by birth, and citizens of the former Trust Territory of the Pacific Islands (TTPI) who acquired Palau citizenship in 1994, are entitled under the Compact to travel and apply for admission to the United States as non-immigrants without passports or visas. Admission to the United States, however, is not always guaranteed. Most grounds of inadmissibility under U.S. immigration laws, such as criminal convictions, are applicable. Those who have been convicted in the U.S for crimes prior or after the Compact may not be able to travel to the U.S. Nonetheless, if admission is grant under the Compact, citizens of Palau may live, study and work in the United States. They are granted an indefinite length of stay, also referred to as "D/S" or "duration of status." Furthermore, naturalized citizen of Palau who have been a residents of Palau for not less than five years after naturalization with a certificate of actual residence may exercise privileges under the Compact. The Compact privilege applies only to Palauan citizens, and does not apply to non-Palauan-citizen husbands, wives, and children of Palauan citizens. Non-Palauan's must apply for admission under the provisions of U.S. immigration law that apply to their nationality and U.S. immigration status sought, including those regarding possession of a valid passport, and if also required, a U.S. visa. For example, if a naturalized Palauan citizen is married to a citizen of the Philippines, the privileges only applies to the naturalized but does not applies to the spouse and the children of the couple.

Under the COFA, security for FSM and Palau is to be provided by the United States and administered under the naval command. However, there are different provisions concerning the security of Palau. Palau has a intrinsic security provision due to its strategic location and its constitutional boundary. Since both of these nations have no military forces, it solely depends on the U.S for security.

The promised security for FSM under the COFA, The United States has full authority and responsibility for security and defense matters in or relating to Federated States of Micronesia. Its authority and responsibility includes the provision of any threats and or attack of the Islands by foreign intruders. Furthermore, United States shall not dispose any nuclear weapons, test, detonate or use chemical or biological that will cause harm to the people and their environment. U.S agrees to confirm its acts in accordance with the international laws and the U.N charter before it exercise it authority to establish any military base in the islands. The authority to use the Islands in case of an international conflict in the pacific and to establish a military base in the Islands is only granted by the U.S Congress in time of distress. The bottom line is, U.S security promise to FSM is any that is in conflicts with the United States foreign and domestic policy, U.S will defend the islands.

Under the security provision for Palau, in section 312 of the Compact states "the territorial jurisdiction of the Republic of Palau shall be completely foreclosed to the military forces and personnel or for the military purposes of any nation except the United States of America". United States has full authority and responsibility for security and defense matters in or relating to Palau. Under the provision of Defense Sites and Operating Rights, U.S may designate land and water areas in accordance with the provisions of a separate agreement, which shall come into force simultaneously with this Compact. The Government of the United States may invite the armed forces of other nations to use military areas and facilities in Palau under the control of United States Armed Forces. Furthermore, the United States agrees to provide security of the 200 square miles as a nuclear free zone surrounding the island of Palau as stated in the provision of the security initiative.

Finally, by signing the COFA between Palau, FSM and the United States, both nations sealed their commitment to have a diplomatic relationship with the U.S. All three governments may establish and maintain representative offices in the capitals of the other. Establish official communications as a sovereign States and provides immunity from search while performing in their official capacity.

End of the first Compact

A new round of negotiation to continue U.S aids to FSM and Palau begins. U.S is a little skeptical about the negations and wanted FSM and Palau to show improvements made during the first COFA. It is a show and tell time for these two nations. What interest does the U.S have with FSM and Palau? What is the U.S proposal and what if the COFA is not approved or amended in the next round of negotiation? Will FSM and Palau walk away in search of another donor?

FSM COFA ended in 2003 and Palau COFA ends in 2009. Therefore, Palau and FSM must re-negotiate if they want to maintain the relationship with the United States under the current COFA.

The concept of COFA and its promises to these nations is outstanding, but will the promise of economy, immigration, political relationship and security help Palau and FSM solves its problems and provides them with enough ammunition to be a self-governing nation? Is the government of Palau and FSM capable of handling this much freedom with so little check and balance? As the original COFA ends and a new negotiation begins, U.S is searching deeper to see if it should maintain its course with financial aids to Palau and FSM or should it cut most of its original promises. Palau and FSM claims that it met all the provision of the original COFA and needs additional help through the final stages to be a self sustain nation in the next decades. Seeing China getting more vocal in the Pacific Region, U.S decided that, it is in their best interest to proceed with the negotiation of a new COFA. However, Palau and FSM wants to amend some of the provision of the COFA and not re-negotiating a new contract due to time restrain.

United States government decided to audit FSM and Palau financial accountability of the funds and the uses of its grants. FSM for example, was awarded 150 million dollars over the 15-year period in which they could not account 50% of the money. There was no transparency, and oversight of U.S. Compact funding in FSM. Payment and reporting procedures were not clearly defined and the annual audit reports to the U.S were over looked by both agents. The auditors found that FSM relies heavily on one individual to prepare its financial statements and has had difficulty recruiting a Chief of Finance and Accounting. As a result, FSM is at risk of being unable to sustain the financial accountability improvements made to date. FSM claimed that the money was well spent within the FSM States and that each States were responsible for their own audit. However, assistance within the finance department is improving. Poor excuse, but U.S bought it. Palau on the order hand, received over 852 million dollars of aids from1995-2006. Palau single audit reports for fiscal years 1995-2006 show that Palau has made progress in its financial accountability through improvements in the timeliness and reliability of its financial statements. However, the reports show that Palau has persistent internal control weaknesses over financial reporting and over compliance with laws and regulations governing federal grants. According to Palau officials, inadequate capacity in financial accounting resources and expertise limits Palau's ability to address these weaknesses in a timely way. These weaknesses put at risk Palau's ability to sustain its progress in financial accountability and to operate a major federal program according to applicable requirements. Palau met most compact and subsidiary accountability requirements. However, although Department of Interior (DOI) used single audit reports and Palau's compact annual reports to monitor Palau's use of compact funds, DOI's oversight was lacking in some matters.

United States proposal to FSM and Palau under the re-negotiation plan

The new proposal is closely parallel with the original Compact but with new requirements for FSM to follow. U.S. proposals is to renew the expiring COFA and to provide about $3.4 billion in new authorizations and decreasing levels of annual grant assistance over a 20-year term (2004 through 2023). Build a trust fund for the future to replace the grants that are due to expires. The fund is going to be based on the world economy and so it might achieve its goal or might not depends on the market. Furthermore, U.S. Proposals also allow for the withholding of funds and give the United States control over the annual consultation process and trust fund management. U.S wanted to make sure this time that the funds will not be misused or unaccounted for.

United States proposal to Palau was 178.5 million dollars that will be distributed annually at a rate of 15 million dollars. Palauan's did not think that it was a good proposal and rejected it. According to Senator Koshiba, The proposal is "nothing more than an arbitrary determination made without due consideration of the facts of the ground here with respect to the funding Palau needs to continue to thrive," as he address the forum of the Pacific Islands Affairs. Palau funds ended Sept. 30, 2009, but the U.S. promised to extend it for a year while the two nations "review" their Compact's funding provisions. When Palau provided a proposal to the U.S government before the negotiation started. However, U.S did not consider the financial analysis presented by Palau and made their own proposal. Palau was not be pressured by a timetable set by U.S. which wanted the review concluded last Oct. 19, 2009. Palau sent a letter to the DOI rejecting the proposal, stating that it will not agree to accept a package that do not response to the requirements of the review, that is not adequate to their best interest. Palau wants the U.S. to continue the level of financial assistance originally set by their Compact - at least $15 million in direct assistance, which amounts to $225 million for the next 15 years. Palau's President Johnson Toribiong said that expiration of the United States economic assistance to Palau under the Compact of Free Association will not be felt immediately after 2009. He went on to say that, Palau have enough money in the trust fund in case the U.S decides to prolong the negotiation process. The Vice President of Palau supported the President by saying that, Palau budget for the next fiscal years does not include the Compact funds.

U.S proposal under security and immigration did not change anything in terms of defends to the Pacific region and the immigrations of the people of Micronesia. Funding this program is under a different provision and does not affect the Compact aids. United States interest in the Pacific region, especially the FSM and Palau goes back to the end of the World War II and remain a vital strategic location in terms of defending the pacific. U.S will do its best to keep the negotiation going and will try to meet all proposals as long as they meet the interest of the United States government.

Meeting the goals

In the case of FSM, it appears that they were forced to accept whatever was the meaning of the "Free-Association" (or the concept of the freely associated states) because of the desperation to have the funding under the second financial provisions. The very concept of sectoral grants reflects this redefinition of the "Free Association". To what degree should the Freely Associate States (FAS) be considered "independent"; and to what degree would they be treated as if "domestic entities" like the Territories--as managed by DOI/OIA. Palau seem to be fighting for what they believe to be in their best interest. As sovereign states, Palau is exercising it negotiation power thru international relationship with other countries. The Palauan' are under the impression that they are nothing more than another foreign country seeking aid and the U.S. is nothing more than another donor to Palau."

What needs to be done?

Well, FSM is done and signed its amended COFA while Palau is still sitting at the negotiating table. Palau needs to keep the pressure and negotiate to their best interest. The Free-Association political relationship needs to be defined so that its states would know exactly what it means. FAS is sort of between the "territorial" status and the "independent" status. That is how I understand it. FAS countries chose to establish this unique relationship with the US and in doing it, they relinquished some elements of their sovereignty.


COFA is the bread and butter for this two nations and it does not matter what they propose to the U.S government. U.S will enact it policies based on its national security and international politics. U.S will redefine and characterize the concept and the underlying philosophy of the Free-Association (FA). In the case of the FSM, the U.S has implemented rather rigid rules on how to use the Compact funds and have assigned the implementation to US DOI/OIA. FSM feels that this policy makes them domestic entities--as opposed to being "independent" states. It is not free money and therefore, U.S is only securing its interest on how the money is spent. However, The COFA has succeeded in meeting two out of the three original U.S. objectives in the relationship with the FAS. The Compact guided and supported the transition of the FSM and Palau from Trust Territory status to full self-government. Both are now well-established, vibrant democracies that play an active role in the Pacific Forum, the United Nations and other international organizations. The United States values them as close allies. The Administration has proposed to close soon on the Compact language and funding levels with the FSM and Palau. Finally, until these two nations become self-independent from the U.S, COFA will still be the best solution for their economy as well as their political status worldwide.