The United States notched multiple diplomatic wins in the Pacific Islands region last week, making further progress in Washington’s efforts to step up engagement in this oft-neglected part of the world. In a move closely watched by Pacific nations, the United States signed deals to renew its economic assistance to Palau and the Federated States of Micronesia for the next 20 years. Meanwhile, although President Biden had to cancel his planned visit to Papua New Guinea, Secretary of State Antony Blinken inked a defense cooperation deal with the island nation in the president’s stead. While the region has become another arena for U.S.-China competition, Washington has long-standing relationships and interests there that go well beyond its rivalry with Beijing.

Secretary Blinken signs a Defense Cooperation Agreement with PNG Defense Minister Win Daki, Papua New Guinea, May 22, 2023. (Chuck Kennedy/State Department)
Secretary Blinken signs a Defense Cooperation Agreement with PNG Defense Minister Win Daki, Papua New Guinea, May 22, 2023. (Chuck Kennedy/State Department)

USIP's Camilla Pohle-Anderson and Gordon Peake examine recent agreements between these Pacific Island countries and the United States and explore what the deals mean for U.S. engagement in the region.

What is the significance of agreements that the United States recently signed with the Federated States of Micronesia and Palau?

In its 2021 strategy for the Pacific Islands, Washington made it a priority to enhance its relationships with the Republic of Palau, the Federated States of Micronesia and the Republic of the Marshall Islands — countries with which the United States has Compacts of Free Association. Last week, the United States reached agreements on renewed economic assistance to Palau and the Federated States of Micronesia, but has not reached a deal with the Marshall Islands.

Known collectively as the Freely Associated States, these three countries stretch between Hawaii and the Philippines, north of the equator. The islands, numbering in the hundreds, are spread across a swath of the Pacific Ocean about the width of the continental United States. They were administered by Washington as trust territories from the end of World War II until their independence — the Federated States of Micronesia and the Marshall Islands in 1986, and Palau in 1994 — leading to their unique ties with the United States today.

Each country signed a Compact of Free Association with Washington upon independence. Under these agreements, the Freely Associated States receive economic assistance from the U.S. government and access to programs and services like the U.S. Postal Service. Their citizens can live and work in the United States without a visa and can enlist in the U.S. military — which they do at a higher rate than any U.S. state. The United States also provides for the Freely Associated States’ security and can construct military facilities there, as well as deny third parties from using the islands’ airspace, territories and territorial waters for military purposes.

The security provisions of the Compacts of Free Association last in perpetuity, whereas the economic assistance provisions have a 20-year duration, and it is the latter that the United States and the Freely Associated States have been renegotiating.

By renewing economic assistance to Palau and the Federated States of Micronesia, the United States is fulfilling a vital responsibility to these close U.S. partners. Washington’s economic assistance provides most of their government budgets as well as funding health services and education. The significant increase in U.S. funding is also a sign of renewed commitment from Washington, which the Freely Associated States have been hoping for after decades of relative neglect. The Federated States of Micronesia and Palau will reportedly receive $3.3 billion and $760 million respectively over the next 20 years, although congressional approval is needed before the agreements are brought into force.

U.S. economic assistance to the Marshall Islands also needs to be renewed, but these negotiations have been more difficult. The U.S. government conducted 67 nuclear tests there between 1946 and 1958 while it was a trust territory, and this legacy has long been the single most significant rift between the two countries. The Marshall Islands government is unwilling to sign a new agreement until the United States pays more financial compensation for nuclear testing and the U.S. president offers a full apology. In addition, it is an election year in the Marshall Islands. These factors suggest that the United States and the Marshall Islands will probably not reach a deal this year to refund the Compact of Free Association.

What is the significance of agreements that the United States recently signed with Papua New Guinea?

Last week, the United States and Papua New Guinea (PNG) signed a Defense Cooperation Agreement (DCA) and an Agreement Concerning Counter Illicit Transnational Maritime Activity Operations, known as a “shiprider” agreement. Blinken signed the agreements in Port Moresby instead of Biden, who had to cancel his trip because of debt ceiling negotiations.

DCAs are common frameworks used all over the world for routine defense cooperation. But as commonplace as they are, they also signify the importance of political relationships. This DCA is a sign that the United States is looking at Papua New Guinea more intently than at any point since World War II and is seeking to elevate the bilateral partnership.

The final text of the agreement has not yet been released but the accompanying press release notes, “This DCA will facilitate bilateral and multilateral exercises and engagements in support of regional capacity building priorities. It also enables the United States to be more responsive in emergency situations, such as those involving humanitarian assistance and disaster relief.” Focusing on humanitarian assistance and disaster relief makes sense for a country — like others in the region — that is increasingly vulnerable to the impacts of climate change.

However, the agreement will not have legal force until Papua New Guinea’s parliament approves it — and the agreement has its detractors. One critique is that PNG’s leaders are deviating from a long-standing policy of nonalignment, often expressed using the mantra “friends to all, enemies to none.” PNG Prime Minister James Marape says the agreement does no such thing, noting that it doesn’t stop Port Moresby from “doing business” with other countries, including China.

There is also the perennial issue of implementation. Previous ambitious U.S. announcements in PNG — upgrading facilities on Manus Island and improving electrification across the country — are way behind schedule. Papua New Guinea has always been a difficult place for implementing grand plans, and this agreement will be no exception.

Meanwhile, the shiprider agreement aims to bolster PNG’s maritime domain awareness and law enforcement capabilities. It will improve PNG’s ability to counter illegal fishing in its waters, where 10 percent of the world’s tuna is caught. It will also help intercept the movement of narcotics on what one Australian law enforcement professional called a “maritime drug highway to Australia.” As the name suggests, a shiprider agreement enables host-nation maritime law enforcement personnel to ride on U.S. Coast Guard and Navy vessels, improving PNG’s ability to detect and deter illegal activity. The United States has 11 similar agreements with other Pacific nations.

Yet despite these good intentions, a shiprider agreement is only as effective as the frequency with which U.S. vessels are transiting a country’s exclusive economic zone. Advanced satellite surveillance systems and other means to enhance maritime domain awareness will also be essential for curbing illicit activities in PNG’s waters.

What do these agreements signal about U.S. engagement in the Pacific Islands, and what part does China play?

Although these four agreements serve different purposes, they all signal greater U.S. commitment to the Pacific Islands and the centrality of the Freely Associated States and Papua New Guinea to the emerging regional strategy. And while China is not mentioned in the agreements, in a way it is written in invisible ink between the lines.

The Freely Associated States are increasingly the target of Chinese influence activities, bribery of government officials and criminal activity linked to the Chinese Communist Party. Beijing also has an interest in persuading Palau and the Marshall Islands to abandon recognition of Taiwan. The United States government knows that if it does not provide economic support to the Freely Associated States then they may be more easily swayed by China’s offers of largesse. And while the security provisions of the Compacts of Free Association are not up for renegotiation, Washington’s relationships with these countries need to be strengthened to shore up U.S. influence in these strategically valuable islands.

The Freely Associated States are increasingly important to U.S. national security. They could play multiple roles in a U.S. defense of Taiwan, with new radar installations in Palau bolstering maritime and air domain awareness; islands in the Federated States of Micronesia and Palau providing reserve airfields for a more distributed U.S. military posture, especially if runways in Guam are inoperable; and the U.S. missile defense test range located on Kwajalein Atoll in the Marshall Islands supporting missile launches and reconnaissance. In short, there are U.S. interests at stake, and China’s engagement in the Freely Associated States aims to undermine them.

Meanwhile, PNG has been signalling since 2018 that it would like to see more U.S. military engagement, concerns about nonalignment notwithstanding. Now, through the DCA, the United States can strengthen security ties with PNG to become a preferred partner, along with Australia. And while the nature of the agreements with Papua New Guinea are qualitatively different from those the United States has with the Freely Associated States, they still serve to broaden the U.S. strategic presence in this swath of the Pacific as a whole.

However, it would be wrong to view these agreements exclusively in terms of countering Beijing. Washington’s close relationships with the Freely Associated States long precede the current era of geopolitical competition, and the United States also has long-standing interests in the region more broadly. Indeed, it is on U.S.-Pacific mutual interests — in this case, economic prosperity, humanitarian assistance and maritime law enforcement — that Washington is seeking to engage more deeply. Engaging on mutual interests, without naming China, is the right move: Pacific Island countries want Washington to engage with them for their own sake, not to treat them as chess pieces in a great game. For most regular people in the Pacific Islands region, immediate challenges like climate change are very real, while talk of geopolitics is just an abstraction.

Finally, in the midst of these new agreements, the lack of a deal with the Marshall Islands is all the more noticeable. Washington must address the legacy of nuclear testing in order to strengthen relations with this key partner, especially given the new reality of heightened geopolitical competition, where China can easily use this this sensitive issue as a wedge. China is not the only one watching: Pacific Island countries view the United States’ relationships with the Freely Associated States as indicative of its commitment to the region more broadly. If the United States cannot sign a deal with the Marshall Islands that is viewed as fair by all parties, the Pacific Islands may see the United States as less reliable and trustworthy.

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