Recent legislation by the U.S. Congress to avoid a government shutdown has inadvertently created potential funding deficits for crucial Pacific island nations. This development has alarmed analysts and previous officials, who suggest that this could leave U.S. allies susceptible to economic vulnerability, thereby making them more inclined to entertain overtures from China.
The Biden administration had targeted September 30th for Congress to give its nod for new, two-decade funding initiatives for Micronesia, the Marshall Islands, and Palau. Historically overlooked, these island nations are now focal points of the U.S.’s attempt to counterbalance China’s increasing influence in the Northern Pacific region.
These countries have a unique relationship with the U.S., defined by the Compacts of Free Association (COFAs). As per these agreements, the U.S. is tasked with their defense and provides them with economic aid. In exchange, the U.S. is granted exclusive military access to crucial parts of the ocean.
Two of these compacts, specifically for the Marshall Islands and Micronesia, were set for renewal by September 30th. Palau’s renewal is due by the end of fiscal 2024. Earlier this year, Washington proposed a funding package amounting to $7.1 billion spread over 20 years, which is awaiting Congressional sanction. However, the recent “continuing resolution” (CR) – a temporary measure designed to prevent a federal shutdown – did not provide an endorsement for this new funding. Even though it ensures federal services for these islands, the CR inadvertently creates gaps in their financial planning.
Cleo Paskal, a renowned expert with the Foundation for Defense of Democracies, emphasized the significance of the CR’s potential implications. “Though sustaining the services is undoubtedly vital, the implications of the CR can be particularly challenging for the Marshalls, which has an impending election on November 20, and for Palau, which is preparing for elections next year.” Paskal added, “Both nations recognize Taiwan and are integral to the U.S.’s defense strategy in the Pacific.” She cautioned observers to be vigilant of China’s potential efforts to paint the U.S. as an inconsistent ally.
Paskal also noted Palau’s economic concerns. The funding from its existing COFA has decreased as it nears its conclusion, and the nation was hoping for financial support from the new package to address budgetary deficits. Already grappling with the economic aftermath of the COVID-19 pandemic and alleged economic meddling from China, Palau finds itself in a precarious position. The country, which aligns itself with Taiwan (backed by the U.S.), has faced pressure from China to switch its allegiance to Beijing.
The Marshall Islands, too, is in a complex situation. It has yet to finalize new agreement terms with Washington, a process complicated by historical grievances. A significant point of contention is how to tackle the consequences of extensive U.S. nuclear tests conducted there in the mid-20th century.
While these island nations navigate these challenges, China is seemingly prepared to step in with financial support. Roll Call, a digital news outlet dedicated to U.S. Congress activities, recently highlighted an incident where Palau’s Finance Minister, Kaleb Udui, mentioned at a congressional hearing that Beijing had tried to influence local opposition against U.S.’s radar construction plans by proposing to construct a hotel and casino in the vicinity.
Neither the Palauan nor the Marshallese embassies in Washington, D.C., provided immediate comments when approached.
Renewing the COFAs has been a top priority for the Biden administration, and it enjoys widespread support across political lines. However, achieving this goal is not without its obstacles.
Howard Hills, who served as a senior adviser to the U.S. COFA negotiating team until his recent retirement, has identified the State Department’s legal team as a potential impediment. They allegedly want to exert more control over the allocation of the new funds, especially when it comes to addressing the nuclear testing legacy in the Marshall Islands. The lawyers’ reservations stem from concerns that such allocations could expose the U.S. to further claims in the future.
In response to these assertions, the State Department emphasized its commitment to concluding negotiations with the Marshall Islands promptly. It confirmed that there had been productive high-level discussions on the matter, including at the Presidential level, during the recent U.S.-Pacific Islands Forum Summit.
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