Compacts Renewal Ushers in New Era of Relations Between the U.S. and Freely Associated States

When President Biden signed the Consolidated Appropriations Act into law on March 9, he dramatically altered U.S. relationships with the Republic of the Marshall Islands (RMI), the Republic of Palau, and the Federated States of Micronesia (FSM).

These nations - collectively known as the freely associated states (FAS) – are key U.S. allies in an increasingly geopolitically vital region of the world. Their boundaries represent an area of the Pacific that is larger than the 48 contiguous states and in which the U.S. exercises exclusive national security authority.

The region’s proximity to China grants the FAS strategic relevance to the U.S. that is unprecedented since their emergence as newly independent countries after being part of the United Nations’ Trust Territory of the Pacific Islands in the aftermath of World War II. The terms of the renewed agreements reflect the new geopolitical reality.

The U.S. and FAS finalized their initial Compacts of Free Association (COFAs) in 1986  (RMI and FSM) and 1994 (Palau). The 2024 compacts, as contained in the new law, represent the second renewal of each bilateral agreement and include meaningful reforms that strengthen U.S.-FAS relationships, including: (1) measures to provide the FAS with much greater financial assistance and economic security, (2)  expansion and continuation of U.S. Federal programs, (3) new government structures designed to enhance diplomatic ties, and (4) provisions that address the U.S. nuclear legacy in the RMI.

COFAs are complex and multi-faceted arrangements, touching on the jurisdiction of roughly a dozen U.S. departments and agencies. Provisions in the recent renewals include:

I. Expanded Federal Resources

• Overall funding for the Republic of the Marshall Islands is 54% more than during the last 20-year Compact period, totaling $2.314 billion, with $497 million available in FY24. Funding is allocated specifically for healthcare, infrastructure and to combat climate change, as well as for other
• Financial assistance for Palau is set at $889 million over 20 years for health, education, infrastructure, public safety and justice, climate change, the environment and Palau is scheduled to receive $90 million in financial assistance for the current fiscal year, with slightly more next year.
• Compact financial assistance is to be mandatory and secure under U.S. law instead of subject to the discretionary annual appropriations process, providing necessary reassurance to COFA allies.
• U.S. financial and Federal programs assistance will continue indefinitely, bringing equity to the relationships consistent with the ongoing, unlimited U.S. right to deny military forces of other nations access to the FAS. A phase-out of U.S. economic assistance had been planned despite U.S. military rights continuing in the region, but under the new COFAs economic assistance is now scheduled to continue with U.S.-FAS renegotiations taking place every two decades.  

II. U.S. Federal Programs and Services in the Freely Associated States

• Veterans’ health care services are authorized in the FAS, with travel costs available for reimbursement when health services are unavailable.
• The United States Postal Service (USPS), National Weather Service (NWS), Federal Aviation Administration (FAA) and the Federal Deposit Insurance Corporation (FDIC) will continue operations in the FAS.
• Head Start and several other Federal education, special needs and job training programs were reinstated in the RMI and FSM after being dropped in the 2003 Compact agreement. These programs will also be continued in Palau. Additional funding is provided for RMI and FSM in recognition of previous U.S. underpayment of Federal education obligations.
• FAS citizens have access to Pell Grants and, for the first time, will be offered in-state tuition at public universities. COFA migrants living in states are also re-eligible for nutrition assistance and other federal assistance programs that were withdrawn in 1996.
• U.S. National Health Service Corps services are provided in the FAS. 

III. Enhancement of Diplomatic Ties Through Government Reforms

• A new unit with four personnel will be created at the State Department to address FAS policy, complementing the existing Desk Officers for the FAS.
• An Interagency Group on Freely Associated States, which will include the Department of Defense, is to be established by Executive Order under the terms of the new law. This entity will report to the President yearly, and the President will be required to report annually to Congress. 

IV. Addressing the U.S. Nuclear Legacy in the RMI

• New resources to examine and preserve the history of the U.S. nuclear program and its legacy include $10 million for increased access to records and $5 million for a museum.
• The U.S.-RMI COFA renews the RMI’s right to submit a “Changed Circumstances Petition” for nuclear legacy implications arising since the signing of the first Compact. The new U.S.-RMI COFA also requires the U.S. to discuss nuclear claims upon the request of the RMI.

These significant enhancements to the Compacts of Free Association reflect a renewed appreciation for the U.S.' closest Pacific Island nation relationships and are poised to alter U.S.-FAS relations in fundamental ways. Reforms of this magnitude will take time to implement, but they will gradually occur and strengthen critical U.S. alliances with the COFA nations in the months and years to come.