Editor’s Note: The following is an excerpt adapted from the USIP Senior Study Group report, “China’s Influence on the Freely Associated States of the North Pacific,” which was published on September 20. The report explores how China’s engagement in the Federated States of Micronesia, the Republic of Palau and the Republic of the Marshall Islands threatens U.S. interests both locally and in the broader Pacific region, provides a nuanced perspective on the importance of the Freely Associated States and makes practical recommendations for policymakers in Washington.
For much of the last 75 years, the Pacific region and in particular the Freely Associated States of the northern Pacific (FAS) — the Federated States of Micronesia (FSM), the Republic of Palau and the Republic of the Marshall Islands — were not regarded as U.S. national security priorities.
On some level, this deprioritization is not surprising: the region’s total population is around 2 million scattered across a vast expanse of ocean; its economies are small and, with the exception of fisheries and (historically) the garment industry, largely peripheral to global supply chains; many of the smaller Pacific nations are at high risk of natural disasters and perceived to have limited pathways to economic development. In part because of these factors, as well as the immense distances that separate Pacific nations from both the United States and Eurasian mainlands, the Pacific was not a site of significant geopolitical competition during the Cold War or in the years after it. Until recently, Chinese engagement in the region was not viewed as carrying any obvious implications for U.S. defense operations in the Pacific theater or threatening any significant U.S. economic interests.
Strategic Rivalry Leads to Reassessment
Intensifying competition with China has led U.S. policymakers to reappraise the strategic significance of the Pacific and the FAS. But U.S. interests in the FAS predate the current era of great power rivalry and were always greater than many in Washington acknowledged. The unique security relationships established by the Compacts of Free Association have magnified the U.S. power projection in the Indo-Pacific region, structured U.S. defense planning and force posture, and contributed to essential defense capabilities. In particular, the U.S. right of strategic denial over the vast FAS territorial seas, which span much of the northern Pacific Ocean, knits together U.S. forward presence and creates a key buffer between military bases in Guam and Hawaii and Asian littoral waters. In addition, the U.S. military installation on Kwajalein Atoll in the Republic of the Marshall Islands functions as a key component of U.S. space and ballistic missile-defense capabilities, one that even two decades ago the Department of Defense characterized as “an important asset that would be costly and difficult to replicate.”
Just as important, the economic and political linkages between the FAS and the United States, as well as the geographic proximity of FAS territorial seas to Hawaii and Guam, directly protect the U.S. homeland. In addition, the right of FAS citizens to freely travel to and work in the United States means that an intensification of migratory pressures would be felt first and foremost in U.S. municipalities. Compact migrants are disproportionately homeless, unemployed, and lacking health care, in significant part because of the inconsistent nature of access to federal services. Accordingly, a surge in Compact migrants is likely to strain local administrative resources and potentially contribute to existing social problems such as homelessness and human trafficking.
On a less tangible level, the prosperity and stability of the FAS creates a positive legacy for the United States as a benevolent regional power and sends a strong signal about the durability and resolve of U.S. commitments. The U.S.-FAS relationship is unique: although the FAS are not the most powerful or wealthy of the United States’ international partners, they are its closest partners. The range of services the United States provides within FAS territories and the privileges it grants to FAS citizens are greater than in any other country; likewise, no other sovereign countries grant Washington as much control and oversight of their defense and foreign policy. FAS societies are deeply interlinked with that of the United States, including in regard to military service.
The interdependence at the heart of the U.S.-FAS relationship is a double-edged sword. Thriving FAS societies and robust, mutually valued U.S.-FAS relations deliver a message that the United States and the security order it backstops can help build prosperous, democratic societies. By contrast, if FAS societies fall victim to social ills or poverty, or if U.S.-FAS relations grow strained, the value and credibility of other U.S. partnerships and relationships are called into question. For U.S. treaty allies in East Asia and other Pacific Island countries, downgrading or neglecting U.S. Compact responsibilities could be seen as a sign of diminishing U.S. commitment. If Washington cannot meet its commitments to its closest allies given their low cost and strategic relevance, how can it be trusted to guarantee the security of far larger countries at far greater expense?
China’s Expanding Influence in the Pacific
China’s economic and geopolitical rise and its expanding influence in the Pacific reinforce some of these U.S. interests and create new ones. The value of the buffer created by U.S. strategic denial over FAS territorial seas is poised to increase as China seeks to make good on its blue water navy ambitions and to deepen its security relationships with Pacific nations. In addition, as Washington seeks to limit the scope of Beijing’s influence in the Indo-Pacific in concert with regional partners, the U.S.-FAS relationship functions as a key vehicle for reinforcing regional norms and democratic values. Although the Freely Associated States have different outlooks on Beijing, they share with Washington an interest in avoiding excessive Chinese influence in the regional architecture of the Pacific Islands. This was seen most recently in March 2022, in FSM President David Panuelo’s public objection to a regional security pact proposed by Chinese Foreign Minister Wang Yi, which Panuelo argued would threaten regional stability and increase the likelihood of military conflict between the United States and China.
China’s success in attracting some Pacific Island governments, such as Kiribati and Solomon Islands, to recognize Beijing, has rested on its ostensible commitments to helping them meet the threat of climate change and promises of economic development, which Beijing claims are superior to the benefits offered by relationships with Taiwan, as well as with traditional regional powers such as Australia, Japan, France, New Zealand and the United States. Were the FAS to pivot to dependence on China for their economic growth and climate resilience goals, the shift would not only likely lead to greater Chinese influence in the FAS — including the potential for China to persuade Palau and the Marshall Islands to switch recognition from Taipei to Beijing — but also substantially undermine the U.S. ability to credibly defend the broader network of democratic partnerships that have historically defined the Pacific’s regional architecture.
Fears Over Fragmentation
One especially troubling scenario for the United States would be the fragmenting of one or more of the Freely Associated States. The Federated States of Micronesia, the Marshall Islands, and Palau encompass hundreds of islands and atolls, many of which have distinct cultures and political traditions. Some local political leaders in the FSM states (Chuuk, Kosrae, Pohnpei and Yap) have expressed dissatisfaction with the FSM federal government’s funding arrangements, which has helped fuel ongoing discussion about secession. A referendum on Chuukese independence was initially scheduled for 2015 and has been postponed several times. Some Yapese secessionists believe that it was a mistake for Yap to join the Federated States of Micronesia when the FSM became independent and that Yap should instead have joined Palau on the basis of cultural similarities and geographic proximity. The FSM’s relative lack of political cohesion dates back to its founding: in the late 1970s, when the islands were part of the Trust Territory of the Pacific Islands, Palau and the Marshall Islands were the first to become political entities, leaving the remaining Trust Territory districts to form the Federated States of Micronesia.
The existence of secessionist movements in the Federated States of Micronesia going back decades — even as efforts to hold independence votes have stalled — probably heightens the risk that economic destabilization could bolster support for independence among the states. Many well informed observers of FAS domestic politics have speculated that the Compact relationship is a critical bulwark against regional balkanization and that the failure of Compact negotiations could, at a minimum, strain the cohesion of the Marshall Islands and Palau and could potentially be a catalyst for states seceding from the FSM. Local dissatisfaction with Chuuk’s poor economy has been a key driver of Chuukese support for secession, suggesting that robust refunding of the Compact could address some of Chuuk’s economic grievances and help preserve the FSM’s territorial integrity.
The potential secession of Chuuk from Micronesia, or the secession of any territory in the FAS, would have significant security risks for the United States, the FAS and the broader Pacific. As an independent state, Chuuk would no longer be subject to the Compact of Free Association, causing the United States to lose its right of strategic denial over Chuuk’s land, airspace and territorial seas. The secession of Chuuk, or any part of the FAS, and the accompanying termination of U.S. strategic denial to the seceding area, would also allow China to establish formal security relationships with the newly independent islands at a time when Beijing is seeking a greater military footprint in the region.
The Pacific also carries outsize importance in preserving Taiwan’s international space, which has emerged as an important U.S. interest at a time when Washington is actively seeking ways to express solidarity with Taiwan’s government and the Taiwanese people. Of the 14 countries that still have formal diplomatic ties with Taipei, four — the Marshall Islands, Nauru, Palau and Tuvalu — are Pacific nations, and two of those are Freely Associated States. Taiwan’s relationships with these countries, in part because of their geographic proximity, are arguably its most vibrant and have presented Taipei with valuable opportunities to elevate its regional and international profile and enhance its soft power. The 2021 announcement of a pandemic-related special travel arrangement between the Republic of Palau and Taiwan, the launch of which involved a visit by the U.S. ambassador in Palau to Taipei, is a recent example of the unique value of Taiwan’s Pacific partnerships. Taipei’s strong connections in the Pacific have the added benefit of functioning as a barrier to Chinese influence efforts. For example, the four Pacific Island nations that maintain formal diplomatic relations with Taipei are also members of the Pacific Islands Forum and have sought on occasion to limit Chinese engagement with the body; in 2018, Nauru, during its term as the Pacific Islands Forum president, refused to allow Chinese observers to attend the forum on their official passports.
The authors are the co-chairs of the Senior Study Group. Admiral (Ret.) Philip Davidson is a former commander of U.S. Indo-Pacific Command. Brigadier General (Ret.) David Stilwell is a former assistant secretary of state for the Bureau of East Asian and Pacific Affairs. Robert Underwood is a former delegate from Guam to the House of Representatives and former president of the University of Guam.