U.S. GOVERNMENT PRINTING OFFICE

51–943 u WASHINGTON : 1998

COMPACTS OF FREE ASSOCIATION WITH THE

MARSHALL ISLANDS, FEDERATED STATES OF

MICRONESIA, AND PALAU

JOINT OVERSIGHT HEARING

BEFORE THE

COMMITTEE ON RESOURCES

AND

SUBCOMMITTEE ON ASIA AND THE PACIFIC

OF THE

COMMITTEE ON INTERNATIONAL

RELATIONS

HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTH CONGRESS

SECOND SESSION

OCTOBER 1, 1998, WASHINGTON, DC

Serial No. 105–117

Printed for the use of the Committee on Resources and Subcommittee on Asia

and the Pacific, Committee on International Relations

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house

or

Committee address: http://www.house.gov/resources
(II)

COMMITTEE ON RESOURCES

DON YOUNG, Alaska, Chairman

W.J. (BILLY) TAUZIN, Louisiana

JAMES V. HANSEN, Utah

JIM SAXTON, New Jersey

ELTON GALLEGLY, California

JOHN J. DUNCAN, JR., Tennessee

JOEL HEFLEY, Colorado

JOHN T. DOOLITTLE, California

WAYNE T. GILCHREST, Maryland

KEN CALVERT, California

RICHARD W. POMBO, California

BARBARA CUBIN, Wyoming

HELEN CHENOWETH, Idaho

LINDA SMITH, Washington

GEORGE P. RADANOVICH, California

WALTER B. JONES, JR., North Carolina

WILLIAM M. (MAC) THORNBERRY, Texas

JOHN SHADEGG, Arizona

JOHN E. ENSIGN, Nevada

ROBERT F. SMITH, Oregon

CHRIS CANNON, Utah

KEVIN BRADY, Texas

JOHN PETERSON, Pennsylvania

RICK HILL, Montana

BOB SCHAFFER, Colorado

JIM GIBBONS, Nevada

MICHAEL D. CRAPO, Idaho

GEORGE MILLER, California

EDWARD J. MARKEY, Massachusetts

NICK J. RAHALL II, West Virginia

BRUCE F. VENTO, Minnesota

DALE E. KILDEE, Michigan

PETER A. DEFAZIO, Oregon

ENI F.H. FALEOMAVAEGA, American

Samoa

NEIL ABERCROMBIE, Hawaii

SOLOMON P. ORTIZ, Texas

OWEN B. PICKETT, Virginia

FRANK PALLONE, JR., New Jersey

CALVIN M. DOOLEY, California

CARLOS A. ROMERO-BARCELO ́ , Puerto

Rico

MAURICE D. HINCHEY, New York

ROBERT A. UNDERWOOD, Guam

SAM FARR, California

PATRICK J. KENNEDY, Rhode Island

ADAM SMITH, Washington

WILLIAM D. DELAHUNT, Massachusetts

CHRIS JOHN, Louisiana

DONNA CHRISTIAN-GREEN, Virgin Islands

RON KIND, Wisconsin

LLOYD DOGGETT, Texas

LLOYD A. JONES, Chief of Staff

ELIZABETH MEGGINSON, Chief Counsel

CHRISTINE KENNEDY, Chief Clerk/Administrator

T.E. MANASE MANSUR, Republican Professional Staff

JOHN LAWRENCE, Democratic Staff Director

MARIE FABRIZIO-HOWARD, Democratic Professional Staff
(III)

COMMITTEE ON INTERNATIONAL RELATIONS

BENJAMIN A. GILMAN, New York, Chairman

WILLIAM GOODLING, Pennsylvania

JAMES A. LEACH, Iowa

HENRY J. HYDE, Illinois

DOUG BEREUTER, Nebraska

CHRISTOPHER SMITH, New Jersey

DAN BURTON, Indiana

ELTON GALLEGLY, California

ILEANA ROS-LEHTINEN, Florida

CASS BALLENGER, North Carolina

DANA ROHRABACHER, California

DONALD A. MANZULLO, Illinois

EDWARD R. ROYCE, California

PETER T. KING, New York

JAY KIM, California

STEVEN J. CHABOT, Ohio

MARSHALL ‘‘MARK’’ SANFORD, South

Carolina

MATT SALMON, Arizona

AMO HOUGHTON, New York

TOM CAMPBELL, California

JON FOX, Pennsylvania

LINDSEY O. GRAHAM, South Carolina

JOHN MCHUGH, New York

ROY BLUNT, Missouri

KEVIN BRADY, Texas

RICHARD BURR, North Carolina

LEE HAMILTON, Indiana

SAM GEJDENSON, Connecticut

TOM LANTOS, California

HOWARD BERMAN, California

GARY ACKERMAN, New York

ENI F.H. FALEOMAVAEGA, American

Samoa

MATTHEW G. MARTINEZ, California

DONALD M. PAYNE, New Jersey

ROBERT ANDREWS, New Jersey

ROBERT MENENDEZ, New Jersey

SHERROD BROWN, Ohio

CYNTHIA A. MCKINNEY, Georgia

ALCEE L. HASTINGS, Florida

PAT DANNER, Missouri

EARL HILLIARD, Alabama

BRAD SHERMAN, California

ROBERT WEXLER, Florida

STEVE ROTHMAN, New Jersey

BOB CLEMENT, Tennessee

BILL LUTHER, Minnesota

JIM DAVIS, Florida

LOIS CAPPS, California

RICHARD J. GARON, Chief of Staff

MICHAEL H. VAN DUSEN, Democratic Chief of Staff

SUBCOMMITTEE ON ASIA AND THE PACIFIC

DOUG BEREUTER, Nebraska, Chairman

JAMES A. LEACH, Iowa

DANA ROHRABACHER, California

PETER T. KING, New York

JAY KIM, California

MATT SALMON, Arizona

JON FOX, Pennsylvania

JOHN M. MCHUGH, New York

DONALD A. MANZULLO, Illinois

EDWARD R. ROYCE, California

HOWARD L. BERMAN, California

ENI F.H. FALEOMAVAEGA, American

Samoa

ROBERT E. ANDREWS, New Jersey

SHERROD BROWN, Ohio

MATTHEW G. MARTINEZ, California

ALCEE L. HASTINGS, Florida

ROBERT WEXLER, Florida

LOIS CAPPS, California

MIKE ENNIS, Subcommittee Staff Director

RICHARD KESSLER, Democratic Professional Staff Member

DAN MARTZ, Counsel

ALICIA O’DONNELL, Staff Associate

(V)

C O N T E N T S

Page

Hearing held October 1, 1998 ................................................................................. 1

Statement of Members:

Bereuter, Hon. Doug, a Representative in Congress from the State of

Nebraska ........................................................................................................ 8

Christian-Green, Hon. Donna M., a Delegate in Congress from the Virgin

Islands, prepared statement of .................................................................... 49

Duncan, Hon. John J., Jr., a Representative in Congress from the State

of Tennessee .................................................................................................. 1

Prepared statement of ............................................................................... 3

Faleomavaega, Hon. Eni F.H., a Delegate in Congress from American

Samoa ............................................................................................................ 4

Miller, Hon. George, a Representative in Congress from the State of

California, prepared statement of ................................................................ 7

Underwood, Hon. Robert A., a Delegate in Congress from Guam ................ 9

Prepared statement of ............................................................................... 10

Statement of Witnesses:

Campbell, Kurt M., Deputy Assistant Secretary of Defense for Asian

and Pacific Affairs ......................................................................................... 15

Prepared statement of ............................................................................... 55

Kyota, Hersey, Palau Ambassador to the United States .............................. 39

Prepared statement of ............................................................................... 63

Muller, Phillip, Minister of Foreign Affairs and Trade, Republic of the

Marshall Islands; Tony DeBrum, Republic of the Marshall Islands,

Ambassador to the United States ................................................................ 36

Prepared statement of ............................................................................... 59

Roth, Stanley, Assistant Secretary for East Asian and Pacific Affairs,

U.S. Department of State ............................................................................. 12

Prepared statement of ............................................................................... 52

Stayman, Allen P., Director, Office of Insular Affairs, U.S. Department

of the Interior ................................................................................................ 16

Additional material submitted by ............................................................ 19

Takesy, Hon. Asterio R., Executive Director, Joint Committee on Compact

Economic Negotiations, Federated States of Micronesia, accompanied

by Jesse Marehalau, Federated States of Micronesia, Ambassador to

the United States .......................................................................................... 33

Prepared statement of ............................................................................... 56

Additional material supplied:

Briefing Paper—Compacts of Free Association .............................................. 52

de Brum, Banny, Ambassador, Embassy of the Republic of The Marshall

Islands, prepared statement of .................................................................... 77

DeBrum, Oscar, Chairman, Nuclear Claims Tribunal, prepared statement

of ..................................................................................................................... 68

Nitijela of The Marshall Islands, Resolution ................................................. 72
(1)

JOINT OVERSIGHT HEARING ON: COMPACTS

OF FREE ASSOCIATION WITH THE MARSHALL ISLANDS, FEDERATED STATES OF

MICRONESIA, AND PALAU

THURSDAY, OCTOBER 1, 1998

HOUSE OF REPRESENTATIVES, COMMITTEE ON RESOURCES, AND SUBCOMMITTEE ON ASIA AND THE PACIFIC, COMMITTEE ON INTERNATIONAL RELATIONS,

WASHINGTON, DC.

The Committees met, pursuant to notice, at 2 p.m., in room 1324,

Longworth House Office Building, Hon. John J. Duncan, Jr. [acting

chairman of the Committee on Resources] presiding.

Mr. DUNCAN. [presiding] The joint hearing will now come to

order.

The Committee on Resources and the International Relations

Subcommittee on Asia and the Pacific is meeting today to hear testimony on the Compacts of Free Association with the Republic of

the Marshall Islands, the Federated States of Micronesia, and the

Republic of Palau.

Under rule 4(g) of the Committee rules, any oral opening statements at hearings are limited to the chairman and the Ranking

Minority Member. This will allow us to hear from our witnesses

sooner and help members keep to their schedules. Therefore, if

other members have statements, they can be included in the hearing record under unanimous consent. After my opening statement,

I will recognize Chairman Bereuter for any statement he may

have. I will then recognize the Ranking Minority Member of the

Committee as well as the Subcommittee on Asia and the Pacific for

any statement.

STATEMENT OF HON. JOHN J. DUNCAN, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TENNESSEE

Mr. DUNCAN. Let me, first of all, commend Chairman Bereuter

of the International Relations Subcommittee on Asia and the Pacific, and Chairman Don Young of the Committee on Resources for

their continuing mutual oversight efforts which began during the

last Congress with a similar joint hearing on the Compacts of Free

Association with the Republic of the Marshall Islands, the Federated States of Micronesia,and the Republic of Palau. Our current

free association relationship with these three separate sovereign republics is unprecedented in U.S. history, and warrants the continued review by the Congress.
2

In 1984, President Ronald Reagan proposed a new status for the

trust territories of the Pacific through negotiated Compacts of Free

Association. Congress then conducted over 30 hearings and the

Reagan Administration responded to various concerns through implementation agreements which were ultimately required in the

legislation approving the new status for the islands. The Congress

approved free association relationships with these areas with the

enactment of Public Laws 99–239, 99–658, and 101–219 in 1985,

1986, and 1989. As separate sovereign nations, these areas have

their own nationality and citizenship, are members of the United

Nations, and have full diplomatic relations based on the Vienna

Convention on Diplomatic Relations.

Certain economic provisions of the compact with the Marshall Islands and the FSM are set to lapse at the end of 15 years. By law,

the administration is to begin negotiations on those provisions next

year. The 15-year lease of the U.S. missile testing facility at Kwajalein in the Marshall Islands is also up for renewal at the same

time.

While not a perfect arrangement, the Compact of Free Association has served the United States interests well by providing the

framework for transition from the United Nations trusteeship to

separate national sovereignty for the Republic of the Marshall Islands, the Federated States of Micronesia, and the Republic of

Palau. The freely associated states have had their share of successes and failures as part of the growing pains of separate

sovereigns. However, in many respects there has been better fiscal

accountability by the free associated state governments under the

compact than there was under the trusteeship bureaucracy. This

seems to be underscored by the lack of Federal oversight of grants

and programmatic assistance in the freely associated states. In

1989, Congress directed the Secretary of the Interior to station at

least one person in the U.S. offices in the Marshalls, the FSM, and

Palau. Apparently it is only recently that just one individual has

been stationed in the islands for all three of the freely associated

states.

This oversight hearing provides a chance for the Congress to

evaluate the progress of the compacts toward realizing President

Reagan’s goal of an internationally recognized separate sovereign

free association relationship based on decades of close friendship

between the people of the former trust territory of the Pacific Islands. We have an opportunity today to meet with members of the

Committees on Resources and International Relations to jointly review the policy embodied in the compact and subsidiary agreements.

I think we can be proud of the Compacts of Free Association,

which contributed to a significant United States leadership initiative that moved relations with the concerned islands out from the

shadows of cold war international politics and recognized the special bonds that had formed between our government and the peoples of the trust territory. Our experience since enactment of the

compact vindicates the policy of President Reagan that self-government, based on the choices made by the people of the islands,

would represent improvement and progress in our relations with

the peoples of the former trust territory.
3

I again wish to thank Chairman Bereuter of the Subcommittee

on Asia and the Pacific and his staff for their cooperation with this

hearing. I also want to acknowledge the support and interest of

Full Committee Chairmen Benjamin Gilman and Don Young regarding U.S. freely associated state matters, who have introduced

House concurrent resolution 92, emphasizing U.S. interests in Micronesia. I look forward to joint efforts between our respective committees to ensure that the United States interest is protected as

the U.S. consults with the free associated state governments regarding compact provisions. The views of the witnesses today from

the administration and the three freely associated states will help

the Congress in understanding the progress to date with the existing relationship, and provide a basis for review.

[The prepared statement of Mr. Duncan follows:]

STATEMENT OF HON. JOHN J. DUNCAN, JR., A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF TENNESSEE

Let me begin by commending the Chairman Bereuter of the International Relations Subcommittee on Asia and the Pacific and Chairman Don Young on the Committee on Resources for continuing mutual oversight efforts, which began last Congress with a similar joint hearing on the Compacts of Free Association with the Republic of the Marshall Islands, the Federated States of Micronesia, and the Republic

of Palau. These Micronesian islands were part of the United Nation’s Trust Territory of the Pacific Islands which the United States administered after World War

II as a strategic trusteeship. Our current free association relationship with these

three separate sovereign republics is unprecedented in U.S. history and warrants

the continuing review by the Congress.

In 1984, President Ronald Reagan proposed a new status for the trust territories

of the Pacific through negotiated Compacts of Free Association. Many questions

were raised about the new status concept of full self-government as a separate sovereign in free association. Congress conducted over 30 hearings and the Reagan Administration responded to various concerns through implementation agreements

which were ultimately required in the legislation approving the new status for the

islands.

The Congress approved free association relationships with these areas with the

enactment of Public Laws 99-239, 99-658, and 101-219 in 1985, 1986 and 1989. As

separate sovereign nations, these areas have their own nationality and citizenship,

are members of the United Nations, and have full diplomatic relations based on the

Vienna Convention on Diplomatic Relations. All three maintain embassies in Washington, DC, and similarly, the U.S. has embassies in the three freely associated

states with either resident ambassadors, or in the case of Palau, a charge ́, the with

ambassador being accredited out of Manila, Philippines.

The U.S. and these islands each have entered into agreements through their respective Compacts, to provide certain rights of obligations to the other party. Most

significantly, the U.S. has exclusive military rights and a legal defense veto over

third party use of any of the land, ocean, or airspace of the islands (this oceanic

exclusive economic zone comprises an area larger than the continental U.S.), as well

as access and use of certain specified land, harbor, an airport facilities in various

parts of the freely associated states, and the islands have free transit into the U.S.

to work, study, or reside. The FAS also use U.S. currency and are synchronized with

the U.S. postal system rates. The Compacts also provide for economic and programmatic assistance for the FAS are varying rates.

Compacts for the Marshall Islands and the Federated States of Micronesia began

on respectively on October 24 and November 3, 1986 while Palau’s Compact did not

start until October 1, 1994. Certain economic provisions of the Compact with the

Marshall Islands and the FSM are set to lapse at the end of 15 years and by law,

the Administration is to begin negotiations on those provisions in 1999. The 15 year

lease of the U.S. missile-testing facility at Kwajalein in the Marshall Islands is also

up for renewal at the same time.

While not a perfect arrangement, the Compact of Free Association has served the

United States interest well by providing the framework for transition from the

United Nations trusteeship to separate national sovereignty for the Republic of the

Marshall Islands, the Federated States of Micronesia, and the Republic of Palau. I

also believe it is fair to say that these new associated republics are doing a better
4

job managing internal and external affairs than the Department of Interior was able

to do as the trusteeship relationship became increasingly anachronistic in the 1970’s

and 1980’s.

The freely associated states have had their share of successes and failures as part

of the growing pains of separate sovereigns. However, in many respects there has

been better fiscal accountability by the free associated state governments under the

Compact than there was under the U.S. trusteeship bureaucracy. This seems to be

underscored by the lack of Federal oversight of grants and programmatic assistance

in the freely associated states. In 1989, Congress directed the Secretary of the Interior to station at least one person in the U.S. offices in the Marshalls, the FSM,

and Palau. Apparently, it is only recently that just one individual has been stationed in the islands for all three of the freely associated states.

There is considerable interest in determining the progress of the islands toward

economic self-sufficiency, one of the primary underlying objectives of the Compact.

The U.S. has a vested interest in seeing the islands achieve economic self-sufficiency

and adequate employment opportunities as the citizens of the freely associated

states have the right to freely enter, reside, study, or work in the U.S. More people

will leave the islands and live in the U.S. if the quality of life does not improve.

This oversight hearing provides a chance for the Congress to evaluate the

progress of the Compacts toward realizing President Reagan’s goal of an internationally recognized separate sovereign free association relationship based on decades of close friendship between the people of the former Trust Territory of the Pacific Islands. We have an opportunity today to with Members of the Committee’s on

Resources and the International Relations to jointly review the policy embodied in

the Compact and subsidiary agreements which was intended by Congress to:

1. Preserve unique strategic partnerships with the Marshall Islands, Palau

and the Federated States of Micronesia;

2. Establish relations under bilateral treaties and with full self-government

for the islands based on U.S. fulfillment of its commitment to respect self-determination, rather than continuing non-self governing status under the United

Nations trusteeship; and

3. Advance economic self-sufficiency through Federal grants, programmatic

assistance, infrastructure development like the Babeldaob circumferential road,

tax, trade, postal, telecommunications, and other areas of mutual cooperation;

and

4. Complete trusteeship responsibilities including the long-term effects of the

nuclear testing program in the Marshall Islands, prior service benefits, and infrastructure defects.

I think we can be proud of Compacts of Free Association, which contributed to

a significant United States leadership initiative that moved relations with the concerned islands out from the shadows of Cold War international politics and recognized the special bonds that had formed between our government and the peoples

of the trust territory. Our experience since enactment of the Compact vindicates the

policy of President Reagan that self-government based on the choices made by the

people of the islands would represent improvement and progress in our relations

with the peoples of the former trust territory.

I want to thank Chairman Bereuter of the Subcommittee on Asia and the Pacific

for his cooperation with this hearing. I also want to acknowledge the support of Full

Committee Chairmen Benjamin Gilman and Don Young regarding freely associated

state matters, who have jointly introduced House concurrent Resolution 92, emphasizing U.S. interests in Micronesia. I look forward to joint efforts between our respective committees to ensure that the United States interest is protected as the

U.S. consults with the free associated state governments regarding the expiration

in 2001 of those Compact provisions which were limited to fifteen years. The views

of the witnesses today from the Administration and the three freely associated

states will help the Congress in understanding the progress to date with the existing relationship and provide a basis for the future.

Mr. DUNCAN. I now will recognize the Ranking Minority Member,

my good friend Mr. Faleomavaega, for any statement that he wishes to make at this point.

STATEMENT OF HON. ENI F.H. FALEOMAVAEGA, A DELEGATE

IN CONGRESS FROM AMERICAN SAMOA

Mr. FALEOMAVAEGA. Thank you, Mr. Chairman. I commend you

for calling this joint oversight hearing between the Resources Com-
5

mittee and the Committee on International Relations Subcommittee on Asia and the Pacific. I am a member of both committees and it is indeed a pleasure to participate in today’s hearing focusing on a very timely subject in the Pacific, the Compacts of Free

Association with the Republic of the Marshall Islands, the Federated States of Micronesia, and the Republic of Palau.

Mr. Chairman, I welcome to the distinguished panel of the administration witnesses to testify before our committees today. In

particular, I would thank Assistant Secretary of State for East

Asian and Pacific Affairs, Secretary Stanley Roth, for appearing before us. When Secretary Roth was with the House Foreign Affairs

Committee, for years we worked closely on policy issues crucial to

the Pacific region, resulting in the issuance of a committee report

entitled Problems in Paradise. I know from personal experience,

Mr. Chairman, that few individuals in Washington possess the

knowledge, the skills and the depth of experience as Secretary Roth

has in the affairs of the Pacific. As a matter of fact, Mr. Chairman,

as far as to my knowledge, I believe Secretary Roth is probably the

only Assistant Secretary of East Asian and Pacific Affairs who has

ever had any understanding or real sense of appreciation and sensitivity to the problems of the Pacific region. I want to personally

welcome Mr. Roth here in our committees.

I would also note and extend a very warm welcome to the second

panel, the distinguished diplomats who have appeared to testify on

behalf of the governments of the Marshalls, the Federated States

of Micronesia, and Palau. I also welcome my good friend, Al

Stayman, the director of the Office of Insular Affairs in the Department of the Interior.

Mr. Chairman, as part of the trust territory of the Pacific Islands, the islands in Micronesia were placed under the trusteeship

of the United States after World War II. Under the United Nations

trust agreement, it was the obligation of the United States to promote the development of the inhabitants of the trust territory toward self government or independence, as may be appropriate to

the particular circumstances of the trust territory and its people

and the freely expressed wishes of the people’s concern.

Mr. Chairman, accepting the trusteeship was not an altruistic

gesture on the part of the United States. Let’s be quite plain about

this. We were careful to use the region for military purposes and

continue to do to this day. Nevertheless, substantial progress has

been achieved in developing the island groups toward greater self

governance. Today there is no longer a trust territory of the Pacific

Islands.

The early 1980’s brought compact agreements among the United

States and the different island groups of the trust territory. In

1994, with the approval of Palau’s Compact of Free Association,

trusteeship came to an end.

Mr. Chairman, I want to especially note the tremendous contributions and keen foresight of the late Congressman Phil Burton,

who participated during the negotiations process which culminated

in our government’s approval of the Compacts of Free Association

with the FSM, the Marshalls and Palau. In fact, Mr. Chairman, to

my personal knowledge, many of the social and educational programs that were provided for the three nations were due largely to
6

Congressman Burton’s strong belief that these programs were critical to the social and economic advancements of these nations.

Mr. Chairman, as we near the end of the initial compact term

in the year 2001 with the Republic of the Marshall Islands and the

Federated States of Micronesia, it is an appropriate time to assess

the state of affairs with these governments. Before we begin with

our witnesses, I have a few observations.

I note first that the initial negotiations in the compacts, such as

with the Marshall Islands, took over a decade and a half. Because

of the complexity of the issues covered by these agreements, the

time necessary for their negotiations, I strongly recommend, Mr.

Chairman, that renegotiation of the contract begin as soon as possible rather than delaying matters until late next year.

In particular, Mr. Chairman, the administration should immediately enter into compact renegotiations, discussions with the

Marshall Islands. This is warranted because of the unique nuclear

legacy that exists between our nations, and the continuing security

contributions to the United States that the Marshall Islands makes

through Kwajalein Atoll. One of the greatest challenges confronting

the Marshall Islands government is the need to address the lingering medical and environmental problems resulting from radioactive explosions caused by the U.S. nuclear testing program.

The legacy of our 67 nuclear weapons detonations has resulted

in a nightmare of health problems for the Marshallese people. Including elevated rates of thyroid cancer, cervical cancer mortality

rates 60 times the U.S. rate, breast cancer mortality rates five

times greater than in the United States, and reproductive complications involving high rates of miscarriage and deformed babies

that are stillborn.

Mr. Chairman, the same is also true for environmental contamination problems in the Marshalls. Temporary storage facilities are

leaching radionuclides into the marine ecosystem around Enewetok

and Bikini. Portions of at least four atolls remain off limits to

human beings. Mr. Chairman, addressing the nuclear legacy left by

the United States has exhausted the limited resources allocated to

the Marshallese people and profoundly affect the ability of the

Marshall Islands to achieve a greater sense of self sufficiency as

envisioned in the compact.

Despite decades of U.S. Government involvement, Mr. Chairman,

the Marshall Islands are no closer to caring for its radiation problems today than it was when the U.S. testing program began. We

must never forget that the sacrifices of the Marshallese people significantly contributed to America’s nuclear deterrence program, facilitating our victory in the cold war.

Mr. Chairman, even in the post cold war era, however, the Marshall Islands continues to be of strategic value to the United

States, and will be for the next several decades because of the U.S.

arms ballistic missile and anti-ballistic missile testing facilities at

Kwajalein Atoll. Given the increasing danger posed by international terrorism and rogue nations such as North Korea, Libya,

Iran and Iraq, it is good that both the administration and Congress

have committed to accelerate national missile defense research and

development programs. Kwajalein Atoll is one of only two U.S.

strategic missile defense test sites authorized under the Anti-Bal-
7

listic Missile Treaty. Moreover, as a buffer between Hawaii and

Asia, Kwajalein Atoll acts as a U.S. intermediary to potential political, economic, and military adversaries such as China and the Pacific region. Kwajalein Atoll also serves U.S. interests by providing

a NASA tracking center and satellite launching sites.

Mr. Chairman, in calling for early compact renegotiations, I

would further recommend that the discussions take place in the

Pacific at the East-West Center in Hawaii. Since its formation in

1960 by an Act of Congress, the East-West Center has distinguished itself as the region’s most respected institution for furthering U.S. relations with the nations of the Asia Pacific region.

It is my understanding that the center would welcome the opportunity to host these important compact discussions. It provides an

ideal forum, conveniently located for all parties concerned.

Concluding, Mr. Chairman, it is important that the compact renegotiations occur in an atmosphere of good faith, free of negativism and disrespect. I find it very disturbing, Mr. Chairman, that

some representatives of the U.S. Government may not share this

point of view and have gone out of their way to show lack of respect for our compact partners, even to the point of interfering with

domestic political affairs such as in the Marshall Islands. Such behavior, if true, Mr. Chairman, is highly unprofessional and beneath

the dignity of our relations with these nations, and they should be

stopped.

Thank you, Mr. Chairman, for holding this hearing to provide

members of both committees the opportunity to determine the status of the commonwealths of the freely associated states. America

has never walked away from her allies in their times of need. As

we enter this important period for compact negotiations, I am confident that our Nation will do what is right and fair for our friends

throughout the island nations of Micronesia. I thank you, Mr.

Chairman.

Mr. DUNCAN. Well, thank you. I mentioned in my opening statement and thanked a couple of times Chairman Bereuter because

this is, as I mentioned, a joint hearing between our Committee and

the subcommittee that he chairs, the International Relations Subcommittee on Asia and the Pacific. I would like to call on my good

friend and one of the most respected members of this body, Chairman Bereuter, for any statement he wishes to make at this time.

Mr. BEREUTER. I thank you very much, Chairman Duncan.

Thank you for your kind words.

Mr. FALEOMAVAEGA. Will the chairman yield? I would also like

to ask unanimous consent if the statement of the gentleman from

California, Mr. Miller, be made part of the record.

Mr. DUNCAN. We’ll make that part of the record.

[The prepared statement of Mr. Miller follows:]

STATEMENT OF HON. GEORGE MILLER, A REPRESENTATIVE IN CONGRESS FROM THE

STATE OF CALIFORNIA

Mr. Chairman. I’m pleased this hearing is being held today in order for us to look

at how well the compacts of free association with the Republic of the Marshall Islands, Federated States of Micronesia, and Palau are working. I want to thank you

for bending to the will of the Democratic members and permitting representatives

of the Pacific nations to join us here today and testify as to their experiences with

compact implementation. I understand the concern for time limitation and the de-
8

sire to focus on the administration, however, since these compacts are bilateral

agreements, it makes sense to have all parties present.

This afternoon we will hear from the agencies responsible as to the various provisions of the compacts to determine if the intended goals are being met and promises

kept on all sides. This hearing will help us prepare for negotiations next year with

the Federated States of Micronesia and the Republic of the Marshall Islands on the

economic provisions. The stated goal of Title II is ‘‘to assist the FAS in their efforts

to advance the economic self-sufficiency of their peoples.’’ This is a tall order and

one that requires hard work, sacrifice, and flexibility by all the nations.

We have a very unique and close relationship with the freely associated states

and their people. I believe we have a special responsibility to nurture and assist

these developing governments in an area of the world where the U.S. has, at times,

had a checkered history. Recently, the House passed a bill dealing with higher education which would have ended eligibility to certain education programs for FAS

students attending college in the U.S. This language was put in by the Majority

party on the Education and Workforce Committee because of their view that as foreign nations the FAS shouldn’t have access to U.S. programs. I disagree with this

notion and firmly believe that assisting FAS students in gaining access to U.S. universities will only enhance the likelihood of the mutually agreed goals of the compacts. As I believe all here are aware, we were able to have that language removed

from the final product but it is a stark reminder of what we will be facing when

renegotiations begin next fall.

I want to thank all of the witnesses for being here this afternoon—those that traveled a few blocks and those who traveled many time zones.

STATEMENT OF HON. DOUG BEREUTER, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF NEBRASKA

Mr. BEREUTER. I just have a few words I would like to say preliminarily. First of all, one, I appreciate the opportunity to hold

this joint hearing with the Resources Committee, Mr. Chairman. I

think it is appropriate now that we examine the state of affairs

with the Freely Associated States and peripherally I would say

with the Northern Marianas, that opted for a commonwealth status.

When I was a junior Member of Congress, I served in this Committee room on the Interior Committee and on what was called the

Insular Affairs Subcommittee. I have visited several parts of all

four of our former trust territories in the Pacific, and followed with

considerable attention what has happened in those areas since that

time. I think as we examine these issues today, we ought to look

at how well the objectives we attempted to achieve in negotiating

the compacts with three of the four Pacific trust territories are

working out. The assistance of course for the Marshalls and Micronesia, the Federated States of Micronesia, will last until 2001. Assistance to Palau, because of a later start will continue to 2009.

The annual grant funding for the Federated States of Micronesia

started out in 1986 at $60 million. Although that figure has declined somewhat since 1991, other program funding has added approximately $50 million a year. The Republic of the Marshall Islands will over the 15-year length of the compact receive approximately a very generous $900 million. For its part, Palau is scheduled to receive $517 million through the compact from 1995

through 2009.

What will happen when the compact with the Marshalls and the

FSM expire in 2001 I think will depend greatly on actions taken

now in the next few years by both the United States and the Freely

Associated States. I would think that our hearing today might attempt to draw attention to issues that will ensure that when 2001
9

arrives, we will be well prepared, and therefore, to look at this

hearing at the purposes of the compacts themselves. We hope to

learn if the early hopes in the U.S. and the Freely Associated

States have been realized. We are interested in learning what

issues we and our friends in the Freely Associated States need to

address before the compacts expire.

For example, what programs do the compacts fund, and how are

these programs administered? To what extent have payments

under the compact promoted economic development, especially selfsufficiency? Also, what additional obligations arise from the compact? I know, for example, that the obligations to provide Pell

Grants and other educational assistance to the Pacific Islands’ students have come under close scrutiny in recent months. What other

obligations are there, and what is the cost to the American taxpayer?

The gentleman from American Samoa mentioned the issue of nuclear waste. I must say I was very disturbed to learn in a visit to

Taiwan that negotiations at some stage of sophistication were underway, at least exploration for Taiwan to ship its nuclear waste

to one of the Freely Associated States, something that I thought

was a very disturbing development, inconsistent with all of the suffering that the people in that region had been through.

I would also say very candidly that when I was in the Marshall

Islands and in the Federated States of Micronesia and Palau and

the Northern Marianas, at least in one or more of those locations,

I saw endemic corruption that was very troublesome. I would hope

that that corruption has been reduced, and hopefully eliminated.

Certainly it was diverting a significant amount of the resources

that ought to have gone to the people of the region from them. I

think, candidly, we need to look at whether or not those corruption

problems are healed or reduced. That is not a blanket condemnation because I saw great variation between and among the various

Pacific trust territories at that time. I hope since they have taken

on a responsibility for their own self governance, except for foreign

policy and national security, that those problems have declined or

been eliminated.

Mr. Chairman, I look forward to the testimony of our distinguished witnesses and the subsequent panel. I thank you.

Mr. DUNCAN. Thank you very much, Chairman Bereuter. Now I

would like to call on for an opening statement my good friend Robert Underwood, who is the Congressman from Guam.

STATEMENT OF HON. ROBERT A. UNDERWOOD, A DELEGATE

IN CONGRESS FROM GUAM

Mr. UNDERWOOD. Thank you, Mr. Chairman. I too want to extend my congratulations to the chairman of the Subcommittee, Mr.

Bereuter, and Chairman Young for holding this hearing. I also

want to extend my own words of welcome to the first panel, especially Stanley Roth, who has been so instrumental in making the

compacts go, as many of us who are familiar with these events

fully recognize.

I have a statement that I would like entered into the record.

Mr. DUNCAN. Yes.
10

Mr. UNDERWOOD. Just to say a couple of comments. I just want

to state that certainly of all the areas that are represented in the

U.S. House, I think the place I represent is most directly affected

by the nature of the compacts as well as the implementation of the

compacts. I want to state for the record that the people of Guam

certainly endorse the idea of continuing whatever kind of assistance can be given to the Freely Associated States in order to advance their economies, because not only is it good in the fulfillment

of an obligation to the peoples of the former trust territories, but

it also helps our own economic development on Guam as well. We

are all tied together by various connections, cultural, historical,

and of course geographical. We all maintain ties that far exceed

and go beyond and sometimes have to go around existing ties that

exist between the United States and these freely associated governments as separate entities.

The compacts are certainly interesting and provide for a different

kind of set of international relations. Although these states are

fully sovereign, I prefer to think of them as ongoing partnerships

and very close partnerships between the United States and the

Freely Associated States. We do have our share of problems of implementation of the compacts, which have had some negative effects on Guam, and certainly I am very happy for the opportunity

to state some of those in my prepared remarks, as well as the process that we’re entering into in order to state them to members of

the administration, so that as they prepare for the negotiations

with the Freely Associated States, that these concerns might be

raised in one way or another.

The problems associated with the migration of large numbers of

people to Guam have been stated repeatedly over and over, including an obligation by the Federal Government to help the government of Guam recover from some of those costs, financially as well

as making sure that we have a full understanding of the meaning

of the term habitual resident. I also want to stress my concern

about the implementation of programs that are designed to help

the Freely Associated States grow economically, but at some point

in time as well, that they might have some not very happy circumstances in Guam, happy fallout on Guam.

One of the issues that the people on Guam continually raise is

the issue of tuna transshipment and how in some of the compact

states they require the tuna to be transshipped out of their own

areas rather than being transshipped through Guam. Of course

that has some negative effect on us.

I remain fully confident that we can work many of these problems out. I certainly hope that we will. I also look forward to hearing the comments about the continuing strategic value of these

areas as we move from what was formerly the only strategic trusteeship under the U.N. system to the concept of strategic denial and

to what we have today, which remains rather unclear to me. Thank

you.

[The prepared statement of Mr. Underwood follows:]

STATEMENT OF HON. ROBERT A. UNDERWOOD, A DELEGATE IN CONGRESS FROM THE

TERRITORY OF GUAM

Chairman Young and Chairman Bereuter:
11

I thank you and, the members of the Resources Committee and the International

Relations Subcommittee on Asia and the Pacific for inviting the panels we have before us today. It is very prudent to begin a dialogue on the Compacts of Free Association in anticipation of renegotiations, and to discuss developments between American-FAS relations since the Compacts were originally agreed to in 1986.

More often than not, I find myself educating my colleagues and other Congressional staff not only about the FAS, but also about Guam’s unique history and our

unique relationship with the FAS. As former trust territories and currently as nations in free association, the Federated States of Micronesia, the Republic of the

Marshall Islands and the Republic of Palau are involved in a mutually-beneficial relationship with the United States in areas such as defense, the economy and education. And as the closest American territory to the FAS, Guam is affected by this

special relationship. I would like to take this opportunity to discuss some of Guam’s

concerns regarding the upcoming Compact renegotiations.

Like any dynamic relationship, Guam and the FAS agree on many aspects, but

we also have issues of contention. As some of my colleagues may know, the FAS

are great transhipment centers for fish products, most notably tuna. Guam also has

the infrastructure and means for becoming such a center. However, due to restrictive regulations requiring fishing fleets who fish in FSM waters to transship only

through the FSM, Guam’s potential in this industry has been effectively stifled. I

understand that it is within international law for the FSM to promulgate such restrictions, however, I see the renegotiation of the Compacts as an avenue for revisiting this issue.

The current economic crisis which began in Asia has already caused numerous

lay-offs and business shut-downs on Guam. Our economy relies heavily on Asian

tourists and without economic diversification, such as one which tuna transshipment can provide, the people of Guam will continue to suffer the whims of an

economy dependent on a single industry.

Another issue I would like to raise is FAS migration into Guam. The Compacts

allowed for the free migration of FAS citizens to the United States and its territories for the purpose of education and employment.

Because of Guam’s proximity to the FAS, we have experienced a surge of FAS migration in recent years and house a great number of ‘‘habitual residents,’’ the technical classification for these FAS citizens. Despite the Federal Government’s limited

reimbursement, Guam’s social and welfare services are strained beyond capacity.

Recently, the Immigration and Naturalization Service (INS) issued preliminary regulations governing and defining the classification of habitual residents. I believe the

renegotiation of the Compacts will also be an advantageous platform to discuss FAS

migration. While the original intent of the Compacts was to provide a manner by

which FAS citizens could seek higher education and employment through migration,

I believe Guam’s experiences as a result of this regulation deserves greater inspection. I know that the people of Guam are very willing to work with the Administration and the FAS on this issue.

Guam’s strategic location at the ‘‘spear head’’ in the Western Pacific, permits a

dynamic responsibility as well as opportunity. During the Cold War, the United

States was the guarantor of peace and stability within the region. This assertion

is no less true today, except that the international security environment is more

complex and perhaps more urgent. The U.S. military has a responsibility to protect

and defend our interests in the Western Central Pacific, the gateway to Asia. But

at the same time, we must be cognizant that entire civilizations reside in these strategic waters and we must respect and acknowledge their historical sacrifices and

commitment to advance U.S. security.

With this in mind, I express Guam’s support that the U.S. take into consideration

the economic disadvantages that characterize the Pacific Islands. We have been a

cornerstone for U.S. defense, and will continue to be, but there are concrete economic necessities which need Federal assistance, not as a handout but as hand up.

I am hopeful that in the upcoming renegotiations, consideration of extending all necessary and appropriate Federal programs to stimulate and advance the economies

of the FAS will be thought through carefully and judiciously.

Again, I thank the Chairmen for convening this hearing, and I thank the panelists for taking the time to educate us further on the impact of the Compacts since

their inception. I hope my colleagues will use this opportunity to educate themselves

on the importance of our special relations with the FAS, I know I will.

The Compacts are not perfect agreements, and there will be room for improvement. I am confident that we can look at the renegotiation of the Compacts not as

the end of a few programs, but as the beginning of improved agreements which will

carry our relationship to a higher level as we enter the new millennium.
12

Mr. FALEOMAVAEGA. Will the chairman yield?

Mr. DUNCAN. Thank you very much. Yes.

Mr. FALEOMAVAEGA. Mr. Chairman, I ask the Chair’s indulgence

in a unanimous request. The poor people have been sitting there

for 100 hours. I would like to ask if it is possible that they can sit

over here since we have a lot of space for members to come, if it’s

all right with the chairman.

Mr. DUNCAN. It’s fine with me.

Mr. FALEOMAVAEGA. You can all come sit in the dais here, if you

like or you can stand there. You can come right over here and sit

down.

Mr. DUNCAN. All right, I would like to go ahead and introduce

the first panel. The first panel consists of the Honorable Stanley

Roth, who is Assistant Secretary for East Asian and Pacific Affairs

of the U.S. State Department, the Honorable Kurt M. Campbell,

Deputy Assistant Secretary of Defense for Asian and Pacific Affairs, and Mr. Allen P. Stayman, Director, Office of Insular Affairs

of the U.S. Department of the Interior.

Let me remind the witnesses that under our Committee rules,

they must limit their opening oral statements to 5 minutes. We

generally proceed in the order the witnesses are listed on the call

of the hearing. That means that Mr. Roth, you would go first, followed by Mr. Campbell, and then Mr. Stayman.

Mr. Roth, you may begin your statement.

STATEMENT OF STANLEY ROTH, ASSISTANT SECRETARY FOR

EAST ASIAN AND PACIFIC AFFAIRS, U.S. DEPARTMENT OF

STATE

Mr. ROTH. Thank you very much, Mr. Chairman. Let me also

begin by commending the two committees for undertaking this

hearing. It is so easy, with all the other big issues on the plate in

the Asia Pacific region and with all the issues you have on the Interior Committee to put this one aside, particularly when we have

not yet started the renegotiations. Taking the trouble to do this in

advance speaks well for both committees.

Let me also thank Congressman Faleomavaega and Congressman Underwood for their particularly warm welcomes. I wish all

my hearings began that way.

I will be brief, not only because of the 5 minute rule, but because

many of the points I had intended to make were already made in

the opening statements by the members of the two committees.

What I tried to do in my statement was to lay out the broad framework, for the Compact renegotiation: where we started, where we

are, where we are going. Many of the specific details and particularly the programmatic details are the responsibility of the Interior

Department, which provides the Compact funding. So I suspect

that most of the questions will go in that direction.

Let me start off with the big picture. First, where we started

from has already been very well covered in the introductory remarks. We started off from a dual perspective. One, what were our

legal and moral obligations under the trusteeship? One of our obligations was to provide for the self-determination of the peoples in

the trust territory. That was a major issue in the 1980’s. It’s easy

to forget now in the post cold war period that this was not then
13

an obscure issue, but in fact was a major issue. In the United Nations it had a high ideological profile. It was in a sense an anachronism from the Second World War. It was a big deal for us to fulfil

our obligations, not only for the peoples of Micronesia, but for our

international standing as well.

The second issue which has been mentioned briefly and will be

discussed more by Dr. Campbell, is defense. In the cold war period

again, there were huge defense issues at stake. We have forgotten

some of those. Of course there was the one that Congressman

Underwood mentioned: strategic denial. This means taking a vast

stretch of the Pacific and maintaining the U.S. military control and

ensuring that we could deny access to the ships of other countries.

This was not a theoretical issue in the last decade. As you’ll recall,

the Russian navy was starting to make significant inroads in the

Pacific, including in the South Pacific, in the 1980’s. So there was

very real concern at the time we were doing the Compact negotiation about Russian agreements with Island countries under the

guise of fishing agreements, which could have given the Soviet

Union direct access to the territorial waters of some of these countries. So obtaining strategic denial in Miconesian waters was a

major plus for us.

Second, during the cold war, continued access to military bases

in the Philippines was a major worry. As a contingency, we wanted

to have a place to pull back to. That was one of the considerations

with respect to the Palau Compact which has now dropped off the

strategic map but was huge back in the 1980’s.

Third, another consideration that’s been mentioned that still applies is the vital strategic significance of Kwajalein. So you had all

these defense interests, combined with our legal and moral interests from the trusteeship.

How has it all worked? Where are we now? I think the answer

would have to be in some senses it’s worked fabulously well. I

think in terms of fulfilling our legal and moral obligations under

the Compact, we have done a good job. The entities are now all

fully up and running as independent states. They are well accredited internationally. There is great stability. In that sense, I think

we have accomplished a lot of what we set out to do.

I think on the security side, the world has changed a lot more.

I think that in fact with the cold war over and with Philippine

bases no longer an issue, for one thing, that issue has dropped off.

The question of strategic denial has changed a bit, but I would

argue, and I think my Defense colleague will argue even more

strongly, has not vanished. While there is no navy comparable to

the Russian navy today in the Pacific, I would not want to stake

my career that there will never be one. The ability to have strategic denial for such a large region has to be important as we think

about the future and into the next century. So strategic denial, if

not as urgent as during the cold war, is still a very real interest.

Of course Kwajalein does remain as important as ever because

of the various missile programs that we have underway and the

scarcity of facilities to test missiles. So we do have strategic interests.

Now how well have we done on our economic goals? I think here

the picture is mixed. Frankly, as someone who had worked inten-
14

sively on the Compact at the time, I would have hoped we would

be further along today in self-sufficiency for all the entities of Micronesia. The truth is we’re not there yet. We can do a lot of

fingerpointing and point out mistakes that have been made, whether it’s by the Freely Associated States themselves or whether it’s

by us, and ‘‘us’’ I think would include both the executive branch

and the Congress. But the reality is that there has been some

progress. I recently returned to Pohnpei in the Federated States of

Micronesia after almost 10 years absence, and I certainly saw significant signs of economic development. So we’ve made some

progress, but they are not ready to go it alone.

The painful truth is, if the Congress and the Administration

were to cutoff funding today or when we renegotiate, then in fact

I think we would have a very hard time in these entities. There

would be great depravation for the people in these entities, and

that there would be a question as to whether we were being consistent with our historical relationship, indeed, our special relationship with these entities. So I think this is a factor that we do have

to continue to look at.

There has been a great emphasis recently on reform, working

with the Asain Development Bank. Since the light is on, I won’t go

into detail. In my statement, I’ve addressed our concerns about

how some of the funds have been utilized. We have real concerns,

but we are trying to address them. We think they can be addressed

and we think there can be more progress.

In terms of where we go from here, first let me commend you,

Mr. Chairman, for stating the issue accurately. A lot of people talk

about renegotiating the Compact. That is not accurate. The Compact stands. There are certain provisions of the Compact which do

have to be renegotiated after 15 years and the negotiations have

to start after 13 years. Those are the provisions we’re talking about

today. We’re not talking about a fundamental renegotiation of the

Compact. We are in the late stages of trying to select a high level

negotiator to undertake this effort for the U.S. Government, but I

don’t have a name for you today.

Finally, in my statement I close, Mr. Chairman, with some of the

questions we’re going to have to look at. We are going to have to

work with both of your committees because the issues involve congressional actions. There are the questions concerning what type of

funding we provide. How much, and under what terms? Do we continue to provide funds with the full faith and credit of the U.S.

Government? Does it require annual appropriations? Do we continue to provide all Federal programs, some Federal programs, or

no Federal programs, and, if so, on a reimbursable or non-reimbursable basis. For what duration do we provide funds? There are

many questions. Frankly, we are not ready to answer them quite

yet.

I think the first thing we have to do is get a negotiator and formulate our internal U.S. position. That has to be done in close cooperation with the Congress. I fully share the sentiment expressed

by one of your colleagues, that we don’t want this negotiation to

last 15 years. If we don’t start right now with close consultations

with the Congress, we are going to repeat the mistakes of the past

and have a long negotiation.
15

But you have my commitment today that we will work closely

with the Congress to try to come up with an original package that

is acceptable and doesn’t have to be legislatively renegotiated over

many painful years. Thank you very much, Mr. Chairman.

[The prepared statement of Mr. Roth may be found at end of

hearing.]

Mr. DUNCAN. Thank you, Mr. Roth.

Mr. Campbell?

STATEMENT OF KURT M. CAMPBELL, DEPUTY ASSISTANT

SECRETARY OF DEFENSE FOR ASIAN AND PACIFIC AFFAIRS

Mr. CAMPBELL. Thank you very much, Mr. Chairman. Also in the

interests of time, I would ask that my full statement be presented

on the record.

I also would like to associate myself with the comments of Mr.

Faleomavaega and Mr. Underwood concerning Stanley Roth. It is

well recognized in the U.S. Government his leadership role he has

played throughout the Pacific, and particularly on these issues. I

think his framework that he has just presented gives us an outstanding way to proceed.

If I may, Mr. Chairman, let me just make four quick points.

First, Mr. Chairman, I like very much the way you began your

statement about talking about these islands, critical to our history

and to our future. And to our present, how they are emerging from

the shadow of the cold war. I think some of the things that we have

to remind ourselves, that although that in fact is the case, that just

because the cold war is over does not mean our security and our

strategic interests go away. They simply changed. That is why it

is so important for us as we go forward to be able to define, redefine our interests as we go forward.

The second issue, to Mr. Underwood’s point, and again, also relating to Stanley Roth’s questions about the security issues. I

would prefer and I think you’ll see in our report that we’ll be producing early next year on what we think are the enduring security

interests that we believe apply to the Freely Associated States, that

rather than thinking about this strictly in a negative sense in

terms of strategic denial, frankly we are beginning to think about

our presence in Asia, particularly in the current context, in the

positive sense. That U.S. presence currently in Asia, a region that

is experiencing tremendous uncertainty, is the big C, is the big constant in the region, amongst a tremendous number of variables.

If I can, and I apologize to other friends who have heard this

story before, I must give you a European analogy which I think has

some relevance for the Asian Pacific region. In the 1980’s, Secretary General of NATO, Lord Carrington, a fine British statesman, was sitting in a room listening to some senior British, German, Italian NATO partners criticizing the United States, saying

you know, right, they are here in Europe. Of course they play an

important role, but they are difficult to work with, they don’t coordinate very well sometimes. Sometimes they can be clumsy. It’s

just very difficult. After listening for about 20 minutes, Lord

Carrington said, ‘‘Ah, alas, they are the only Americans we have.’’

That role is remarkably consistent in Asia today.
16

As we look around the region and we see tremendous uncertainty

on the economic front, with the rise and fall of great nations, instability of the kind that we have already talked about on the Korean

Peninsula, then one of the most important things to keep in mind

is the U.S. presence. This constant will be critical, not just for this

century, not just in the post cold war world, but in the next century

as well.

I would be happy, Mr. Underwood, to elaborate on those themes

as we go forward.

Then just to my friend Mr. Faleomavaega, on the whole question

of Kwajalein, I like very much the way he amplified on the question of the important role the islands will play as we go forward

in terms of theater missile defense testing. I think as you know,

the recent missile test in North Korea has sent shock waves

through the region. I think those shock waves are well understood

in Washington. As we go forward, you are right to say that there

are only two sites in the United States that really can be used both

legally and operationally for the testing of complex theater missile

defense systems. But in practice, there’s really only one that is critical. I think you’ll see us referring to this specifically as we go forward.

The last point I just want to underscore is that we will be working very closely in partnership with Stanley Roth, my friend and

colleague, as we appoint a senior negotiator that will represent our

government in these negotiations. We also believe that it is in the

best interests of the United States and the Freely Associated States

that we begin these discussions prudently and we conclude them

as rapidly as possible. We think that is the best way for both of

our peoples to proceed.

Again, let me just conclude by suggesting that the security interests of the United States still apply, and they will continue to apply

into the future as we go forward.

Thank you very much.

[The prepared statement of Mr. Campbell may be found at end

of hearing.]

Mr. DUNCAN. Thank you, Mr. Campbell.

Mr. Stayman?

STATEMENT OF ALLEN P. STAYMAN, DIRECTOR, OFFICE OF

INSULAR AFFAIRS, U.S. DEPARTMENT OF THE INTERIOR

Mr. STAYMAN. Thank you, Mr. Chairman. I ask that my full

statement be entered into the record. I will summarize.

Mr. DUNCAN. It will be so entered.

Mr. STAYMAN. On title II of the compact for which the Department of the Interior is responsible, is composed of three elements,

financial assistance, program assistance, and tax and trade investment incentives. With respect to the financial assistance, the U.S.

will provide nearly $3 billion over the 15-year life of the compacts.

This financial assistance, which is mostly guaranteed, is provided

with maximum flexibility to the Freely Associated States. Tables

displaying the estimates of the value of the 15 years for this assistance is attached as an addendum.

With respect to the program assistance, under section 221, the

United States agreed to provide the Freely Associated States with
17

services of the Weather Service, FEMA, the Postal Service, FAA.

These services are also listed in the chart at the back. But in addition, section 224 of the compact provided that additional U.S. program assistance could be extended from time to time by Congress.

This provision has been used extensively to establish over a dozen

additional programs.

It is important to note that the compacts as originally negotiated

anticipated that all domestic programs would be budgeted under

section 221 and through the Department of the Interior. When

Congress extended these additional programs, however, it did not

direct that the additional programs be budgeted and administered

through this unified approach, and would instead be administered

by each separate agency. This has eased program administration,

but it has at the same time made it difficult to track such programs.

The third element in title II, the tax and trade investment incentives, were designed to stimulate private sector development and

complement the financial and program assistance. However, the

tax-writing committees of the Congress eliminated this third and

perhaps most important element of the compacts’ economic development strategy. This fundamental policy change de-emphasized the

private sector’s role in economic development and undoubtedly

weakened the potential of the policy.

A second point to be made in assessing title II of the compact is

that the Freely Associated States did not have extensive economic

planning experience. In 1993, the incoming administration responded to these problems with two initiatives. First, we began the

annual bilateral economic consultations which were called for in

the subsidiary agreements of the compact, but for the first 7 years

had never been held. Second, we contracted with the Asian Development Bank to provide economic planning expertise to the FAS.

These new elements in the economic development policy have been

successful in enhancing FAS economic planning capabilities and

decisionmaking.

Chairman Young in his letter of invitation stated his desire to

focus on several specific issues. Let me briefly address those which

I have not already touched on. First, exclusive economic zone enforcement. Under the compact, the United States provides funding

for enforcement of laws regulating the exclusive economic zones.

These enforcement funds are used to operate and maintain patrol

boats that were donated to the FAS by the government of Australia. This combination of the United States and Australian aid

has significantly enhanced the ability of the FAS to regulate fisheries.

Two, the migration of FAS citizens. Guam, the Northern Mariana Islands and Hawaii have all expressed concern about the

numbers of FAS citizens in their jurisdictions and the burdens they

have placed on the governments. Moreover, they believe they

should be reimbursed, pursuant to the compact authorization.

Guam, the destination of the majority of these migrants, is currently receiving $4.6 million annually to help compensate for this

impact. Additionally, the Immigration and Naturalization Service

is developing regulations that would limit habitual residents of
18

FAS citizens in United States territories. This should significantly

reduce the burden of compact migration as well.

A third issue, the resettlement of certain Marshall Island atoll

communities. The peoples of the four nuclear-affected atolls in the

Marshall Islands are in very different circumstances. The peoples

of Enewetak and Utrik have mostly returned to their islands. The

people of Rongelap, who signed a resettlement agreement in 1996,

are now able to return to Rongelap Island. Their restored airfield

is now in use, and public facilities and homes are currently under

construction.

A delegation representing the people of Bikini visited Secretary

Babbitt this April seeking a guarantee from the U.S. Government

that their atoll is safe for resettlement. The secretary responded

that the department supported the September 1996 International

Atomic Energy Agency Advisory Group Report on Radiological Conditions at Bikini. The IAEA found that Bikini Island was ready for

permanent habitation as long as certain remedial measures were

fully implemented, especially the application of fertilizer to the soil

and the use of imported food. Should such remedial steps be implemented, radiation doses for people living on Bikini Island would be

acceptable according to international standards, and their health

would be protected against radiation exposure.

Four, construction of the Babeldaob Road in the Republic of

Palau. The NEPA process is nearly complete and the final design

of this road is complete. The Army Corps of Engineers has solicited

price bids, and the price proposals are due on October 10, that is

in just 10 days. We expect the bids will be very competitive due to

the state of Asian Pacific economies. If there is a clearly superior

bid, it may be possible to award the construction contract as soon

as December.

Finally, compact renegotiation plans. This past July the Inter

Agency Group on Freely Associated State Affairs began a process

of outlining the IAG’s renegotiation objectives. Interior is aware

that the FSM and Marshall Island governments will continue to

need some level of assistance after the years 2001 or 2003. The administration looks forward to continuing discussions with the Congress as the United States position for these negotiations is developed.

Thank you. I would be pleased to answer any questions.

[The material mentioned follows:]
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Mr. DUNCAN. Thank you very much, Mr. Stayman. First, I would

like to just mention that we are honored to have in the audience

our U.S. Ambassador to the Marshall Islands, Ambassador Joan

Plaisted. Ambassador, we are certainly pleased to have you with

us.

I would like to yield for questions at this time to Chairman Bereuter.

Mr. BEREUTER. Thank you, Chairman Duncan. I think I ought to

focus on the security end of foreign policy issues since those are

particularly within the jurisdiction, in part at least, of the International Relations Committee. Secretary Roth, welcome, glad to see

you in this venue. What level of involvement has there been in

Palau by the U.S. Ambassador to the Philippines?

Mr. ROTH. He travels there. He takes it seriously as part of his

beat. When he comes back on home leave, for example, he talks to

me about Palau. I think he is very conscious that it is part of his

jurisdiction and job.

In the meantime of course, we keep a permanent presence on

Palau itself. We have a charge ́ there and several other employees.

So it is not as if we have abandoned Palau when Tom Hubbard,

our current Ambassador to the Philippines, is not there.

Mr. BEREUTER. We have a U.S. Ambassador to the Marshall Islands that’s accredited to Kiribati. How is that working out, Mr.

Secretary?

Mr. ROTH. Let me start with the big picture and then get to the

narrow picture. The big picture is that in a different world with

more budgetary resources, I would prefer to have many more Ambassadors throughout the South Pacific. One of my own priorities

has been to try to reopen a post that was closed several years ago,

which was in the Solomon Islands. I think by definition it’s not

ideal when you have countries represented out of other countries.

At the same time, given the enormous constraints on the State Department budget, given the new expenditures that we are going to

have to have on security, it would be utterly unrealistic of me to

suggest that we’re going to be able any time soon to open a lot of

posts in what are, in the final analysis, very small island countries

in the Pacific region. So we are going to have to live with this situation for a while and deal with it as best we can.

Given that, I think the situation has worked reasonably well. Obviously if you ask the people of Kiribati, would they prefer to have

a full-time resident Ambassador, I am sure they would say yes. But

in the meantime, we are not getting deluged with complaints about

the current situation.

Mr. BEREUTER. Secretary Campbell, in the Compact with Palau,

we have reserved the right to establish military bases there, I

think in large part it reflected the fact we were pulling out of Subic

Bay and Clark Air Force Base at the time. Has there been any discussions about that? Is there any likelihood in the near future that

we will attempt to exercise that option?

Mr. CAMPBELL. Mr. Chairman, the assessment of our CINCPAC,

Admiral Prueher, and most of our senior military command, and

that’s backed up by the civilian Department of Defense, is that we

have all the permanent military facilities in Asia that we currently

require, and that we are primarily placing our emphasis on in-
25

creasing access, increasing training with a host of countries and

places in the Asian Pacific region. I think that is where we stand

today.

Mr. BEREUTER. Thank you. Mr. Stayman and Secretary Roth,

has the administration spoken out or does it have a policy with respect to the prospect that the Marshall Islands would propose as

a part of its economic development to store nuclear waste on one

of its atolls?

Mr. ROTH. Yes. This frankly is going right back to the negotiation on the Compact legislation itself more than 10 years ago. At

that time there was concern that countries under financial pressure might seek financial arrangements to store garbage or nuclear

waste or other toxic materials, thereby endangering their own environment. I think it’s been the very clear intent of Congress, and it’s

supported by various Administrations since then, not to see this

happen. We believe it was a mistake. We have opposed efforts by

Taiwan to have nuclear waste disposal programs with North Korea.

We have opposed that in the South Pacific as well.

Mr. BEREUTER. We may have to speak on that issue once more.

Mr. Stayman, do you have anything to say on that subject?

Mr. STAYMAN. I don’t really have anything to add except reiterate the strong opposition of the administration to such proposals.

Mr. BEREUTER. Mr. Stayman, thank you. I’m on my yellow light

here, so I’ll try to crowd in one more question. Since Palau, the

Rock Islands have such a unique ecological system, truly unique in

the world in some respects with flora and fauna, what if anything

has Palau done to try to assure that its ecological system is protected? What role is there for the United States, if any, in the way

of technical assistance that has been requested?

Mr. STAYMAN. To begin with, under the Compact itself Palau

must agree to have essentially mirror environmental standards as

the United States. We think that we are providing technical assistance, not just to the government, but to NGO’s to develop their capability to establish such laws and regulations and enforce them.

With respect to the road in particular, that is probably going to

be the single largest construction project that the U.S. has ever

conducted in Micronesia. It’s 150 millon——

Mr. BEREUTER. But the road doesn’t affect the so-called Rock Island area directly, does it?

Mr. STAYMAN. It will affect reefs off Babeldaob, you’re right, but

not the Rock Islands. What they are doing in the Rock Islands is

establishing marine reserves along models similar to that in the

United States. They have I believe one in the Rock Islands. There

is one at the north end in Kayangel, and under the road for the

purpose of conservation areas. We expect them to establish two

more. So at this point we are confident that they are very committed to protection of their unique environment.

Let me just add that they are very sensitive to the role that the

Rock Islands and their reefs and their natural environment play in

economic development. I don’t think they are going to kill the goose

that’s going to lay the golden egg.

Mr. BEREUTER. Mr. Chairman, if you could just indulge me for

one quick followup.

Have they requested World Heritage designation?
26

Mr. STAYMAN. I am not aware at this time.

Mr. BEREUTER. Thank you, Mr. Chairman.

Mr. DUNCAN. Thank you.

Mr. Faleomavaega?

Mr. FALEOMAVAEGA. Thank you, Mr. Chairman.

Secretary Roth, you had mentioned earlier that the thing good

about the renegotiations process is that only certain provisions of

the Compact are subject to renegotiations, so we’re not starting

from scratch again. I had recently discussed the matter of renegotiation with President Nena of the FSM. They are willing to abide

by the current dating, which will not start until sometime next

year.

However, in my recent meetings with President Kabua of the

Marshall Islands, they are very concerned, Mr. Secretary. They feel

that because of the sensitivities and problems unlike the FSM or

Palau, they feel that it’s really necessary that the negotiations with

the Marshalls should commence at the earliest possible date. What

is your position on that?

Mr. ROTH. I was a little bit surprised to hear that in your opening remarks because there is a provision of the Compact that takes

into account the needs of the Marshalls. I’m referring to the

‘‘changed circumstances’’ provision, which we understand is being

looked at very carefully. In other words, while the nuclear settlement provisions were supposed to be a final settlement, there was

included in the legislation itself very specifically a safety net clause

which said that if there are ‘‘changed circumstances,’’ that a report

can be submitted to the Administration and will be considered. So

there is a means even in advance of Compact renegotiations to deal

with issues relating to the nuclear ones. So one way or another, I

think we can address the Marshallese concerns. I think we have an

obligation to address the nuclear concerns. It is in law, but I think

also we feel it as a matter of policy.

In terms of starting earlier, frankly by the time we get the negotiator appointed and get our own internal coordination amongst all

the interested agencies of the U.S. Government, and I hope have

some intensive consultations with the Hill, it is not going to be

very much earlier than the 1999 date that is set in the legislation

itself. If we can do a little bit better, we’ll try to do so. But I am

particularly concerned that we start off from a realistic base, which

means that I think we have to do a very good job in consultations

with the Congress, particularly these two committees on the House

side before we sit down to engage in negotiations so we don’t end

up with a 15 year fiasco.

Mr. FALEOMAVAEGA. I think the concern that I raised on the

question of renegotiation is the fact that it’s not one shoe that fits

all. The problems dealing with FSM is certainly not the same as

the Marshalls. The fact that our nuclear presence in the Marshalls

is a lot more apparent than we are with the FSM or Palau, for that

matter, it seems that some of these issues are a lot more poignant

and really needs to be addressed as soon as possible, in my humble

opinion.

Mr. Stayman, you mentioned that Congress had eliminated the

tax and trade investment provision in development of the compacts.

Can you explain to the Committee why this was done? Is it because
27

of our fear that we don’t want to allow these countries to negotiate

with foreign countries that may not be in our national interest?

Mr. STAYMAN. I am hesitant to speak for the congressional tax

writing committees this many years later, but as you know, I was

working for the Senate at the time. My understanding was that

generally the Treasury Department did not favor the use of these

kinds of tax and trade provisions, which were essentially the same

provisions available to the U.S. territories. As you know, since that

time the Congress has gone forward and eliminated these programs

for all U.S. territories.

So my understanding was that their very fundamental policy

tendency was toward eliminating these special provisions in the tax

and trade codes. They have gone ahead and eliminated such things

as the possession’s tax credit.

Mr. FALEOMAVAEGA. I am not an economist, but you know, on the

one hand we’re saying that these islanders be more self-sufficient

economically. On the other hand, we cut the left hand by trying to

promote trade investments and have some kind of an internal tax

structure so that they can be more self-sufficient. This doesn’t

make any sense to me at all.

Mr. STAYMAN. In hindsight, I think most people would recognize

that a de-emphasis on private sector incentives and an increasing

of public sector subsidies is not going to help develop the private

sector and get economic self sufficiency in any renegotiation. This

is an area we hoped to work much more closely with Congress.

This is one of the examples which Mr. Roth talked about that had

their been better communication, this might not have happened, so

that we can have a more appropriate balance between the private

sector and the public sector.

Mr. FALEOMAVAEGA. Mr. Chairman, may I ask one more question?

Have you had a fellow by the name of Alex Copson come visit

your office, Mr. Stayman? I want to see his face. This guy is going

around selling the idea of a nuclear storage waste facility in any

of the islands in the Pacific, a multi-billion dollar proposal with

some Russian outfit and some admiral being involved in this issue.

Then the next thing I hear now, there’s a Taiwan outfit with Babcock and Wilcox. Is this an American company? They want to propose also a nuclear storage. I think the last time I heard, Mr.

Copson was at Wake Island that he wanted to do this.

What is the latest development on this nuclear storage thing?

Mr. STAYMAN. We have heard a variety of proposals. I have not

met Mr. Copson personally, but I have met others who are interested in some of these proposals. They have been made with respect to several islands. But generally our response is always the

same. We are against it.

Mr. FALEOMAVAEGA. It’s all right to store nuclear waste in these

islands—it’s not all right, but it is OK to transport nuclear waste

between points, like the French and the Japanese are doing now.

Is that considered a real guaranteed safe for a process? Mr. Campbell, maybe I could ask you. You are the defense expert here.

Mr. CAMPBELL. I’m sorry. I didn’t really understand the question.

Mr. FALEOMAVAEGA. It’s not OK to store nuclear waste material

basically as a matter of policy. I support that. But it is perfectly
28

OK to transport nuclear waste on surface transportation, like what

is happening now between Japan and France?

Mr. CAMPBELL. Let me try to answer just the security dimension.

I’ll let my friend from Interior answer the first part of that. Let me

just say that when there are transfers by ship by their nuclear fuel

for reactors or nuclear waste issues, this is one of the issues that

the United States tracks and looks at very carefully. We do have

security concerns associated with the movement of nuclear materials on the high seas. Yes, indeed.

Mr. FALEOMAVAEGA. No thought or danger that these ships are

subject to any storms, that one day that they are going to end up

just like we said in one to a million chances that the Valdez situation would not have ever happened, what had happened?

Mr. CAMPBELL. Again, if you asking do you think that the United

States views these from a variety of perspectives with some concern, but from the perspective of a potential terrorist attack or

some kind of major storm, I think the answer to that question is

yes. These are not interactions that the U.S. Government is itself

involved in. We have been in communication—I don’t know of the

communications with France, I do know of the communications

with Japan. We consult with them and we have in the past on safety issues associated with this.

Mr. FALEOMAVAEGA. Thank you, Mr. Chairman.

Mr. DUNCAN. Thank you.

Mr. Underwood?

Mr. UNDERWOOD. Thank you, Mr. Chairman. I would, spinning

off of that statement on the environment made by Mr. Stayman

that Palau tries to follow exactly the same or approximately the

same environmental regulations that the U.S., I would like to note

with some envy that they can catch and eat sea turtles and fruit

ants. People in Guam can’t.

[Laughter.]

I am particularly interested in the issue of strategic denial. One

of the reasons that I raise that issue is because I want to know

what is the emerging consensus on what is the new situation regarding the strategic environment in which Micronesia plays in not

only the Asia Pacific situation, but even worldwide.

I know, Dr. Campbell, you mentioned that the United States, the

constant is the big C in the area and that it adds a certain level

of stability. You also mentioned that the United States desires to

maintain a presence in the area. Could you describe and perhaps

Secretary Roth would like to participate in this as well, what if any

activities engaged in by the Freely Associated States would contribute to the erosion of the strategic situation or eroded in any

way?

Mr. CAMPBELL. Let me begin and answer, and then ask Stanley

to continue, Assistant Secretary Roth to continue if I can. On the

first point about the concept of strategic denial, you will note that

when the United States talks about the Asian Pacific region, by

and large we try to talk about it as not a region in which sort of

great power politics are afoot. We do not see a situation in Asia

that is in any way relevant to the cold war world in which we were

involved in a global strategic standoff or competition with the Soviet Union.
29

Our relations with major powers is complex. We believe that the

best way both to engage major powers and to hedge against the

possibility that things do not go in directions that are potentially

in U.S. interests, is to maintain a presence. So our presence in the

Asian Pacific region both acts as an ability to shape the environment with which we desire to live, and also it is a hedge in case

things go badly.

When you ask about what steps that could be undertaken that

could potentially undercut peace and stability in the region, again,

I would turn that to the positive. Our goal by our presence in the

region, our goal with our close association with the Freely Associated States is to shape an environment which prevents the emergence of threats or challenges to peace and stability in the Asian

and Pacific region. We think that is the enduring rationale for U.S.

strategic involvement, not only in the Pacific, but in the Asia and

Pacific as a whole.

Mr. UNDERWOOD. But is there any kind of specific activity engaged in by the Freely Associated States which you are monitoring

very carefully which may erode or may undercut some of this like

fishing agreements or I don’t know, maybe the nuclear waste storage or other issues aside from the environmental dimensions?

That’s what I am getting at.

Mr. CAMPBELL. Let me just say that we track a variety of developments in the region. We look at migration patterns. We look at

fishing. We look at some of the things that Assistant Secretary

Roth has talked about in terms of. We have heard about sort of

groups traveling through the night with nuclear proposals in their

suitcases. We try to track all of that. Again, I think the United

States has fairly strong views on all of these issues.

Mr. ROTH. Let me just add that I think it is worth getting the

perspective right. Strategic denial isn’t something done to the Freely Associated States. It is not per se something we are doing to restrict their behavior. It is, in a sense, a benefit, since, as you know,

under the Compact we are completely responsible for their defense

and are obligated to defend them as if they were part of the U.S.

So anything we do in terms of denying military access to other

countries to this region, presumably it’s for the same benefit of the

Freely Associated States as it is to us. I am not aware that there

has been a single instance where we have ever had to tell one of

the Freely Associated States no, you can’t do something because it

will be bad for the strategic interests of the U.S. I don’t believe we

have exercised strategic denial.

Mr. CAMPBELL. That is perfectly said, what Assistant Secretary

Roth has said. I know of no incident in which we have had to say

no, those activities are contrary to the interests of the United

States.

Mr. UNDERWOOD. Though in each and every instance in your experience, they have fully complied with the intent and purposes of

the Compact in that regard?

Mr. ROTH. Yes.

Mr. CAMPBELL. I would agree with that.

Mr. UNDERWOOD. If I could just ask one brief question on EEZ

because Mr. Stayman raised it. The United States has the obligation and takes on the obligation to help enforce the exclusive eco-
30

nomic zone. The irony for the people of Guam is that our country,

of which Guam is a part, is enforcing this EEZ, particularly with

regard to fishing agreements. Then the benefits, the potential benefits of some of those fishing agreements, i.e. transshipment through

Guam, are being denied by one of the FAS states.

I am just wondering, is that going to be taken into consideration

somewhere in the thinking about how we continue to implement

these Compacts?

Mr. STAYMAN. Yes. I think that first off, they have these resources but we don’t have direct U.S. program involvement in that

surveillance. You know, in Guam you have the Coast Guard would

provide that. What has happened here is we’re simply giving them

money to essentially run Australian boats. Nevertheless, your point

about the impact of transshipment highlights the dilemma we

have, that both Micronesia and Guam are looking to fisheries for

development. It is in the interests of the FAS and FSM in particular to get as much of those benefits within their borders as they

can. That in fact is the policy of the United States under our fisheries laws, to force as many operations within our borders as possible and maximize the economic benefit.

I would suggest that the way to start resolving this problem so

that there is a balance between the interests of Guam and the interests of FAS in extracting the maximum amount of economic benefit is through a regional dialogue. Fisheries in the Pacific have

generally been addressed most effectively through some kind of regional dialogue. As you may know, let’s see in November, we expect

to have many members of the Micronesian Chief Executives and

the Pacific Basin Development Council gathered in Guam. I think

this is the kind of issue that’s going to be at the top of their agenda, is how do we take the Micronesian region and keep folks from

competing over a very important resource like fisheries and try to

strike a balance where the strengths of Guam will complement the

strengths of the FSM and the RMI.

Mr. UNDERWOOD. I’m glad to hear then, I am glad to hear that

there’s appreciation of that in the administration because obviously

much of the enforcement of the EEZ activities that the United

States engages in actually come directly out of Guam. It seems a

great irony to the people of Guam that our own government is not

in a sense working against the interests of Guam, but perhaps not

as mindful as they could be.

Thank you, Mr. Chairman.

Mr. DUNCAN. Thank you, Mr. Underwood.

I did spend about a week in the Northern Mariana Islands a little over a year and a half ago, but I really am the new kid on the

block here as far as these issues in the Pacific go. I was just asking

Mr. Mantz here, I know we have programs with the State Department, the Interior Department, the Defense Department, and other

agencies, and I was wondering what the total expenditures were

from the Federal Government. But he says that he has just provided me with information that this Fiscal Year, we are spending

$40,533,000 in the Marshall Islands, $78.9 million in the Federated

States of Micronesia, and $21,221,000 in Palau. Do your all’s figures agree with that? Is that basically accurate?
31

Mr. STAYMAN. Yes. Those are the numbers I believe off the addendum in my testimony. Those reflect the funds provided under

the compacts. There may be other amounts, but not that significant, particularly you know—let me just go back. For the Freely

Associated States, that fairly represents everything we are providing under the compacts. Again, there may be some small stuff

not caught up in that. Let me just give an example which has recently been very important, that’s Pell Grants. Pell Grants were extended outside of the compact. They obviously have a substantial

value. But that is a payment made to individuals so that does not

track here. If for example, someone happened to be a veteran, payments to individuals would not be reflected.

Mr. DUNCAN. So payments to individuals are not in those figures?

Mr. STAYMAN. Right.

Mr. DUNCAN. And yet I understand from the staff that your department projects an increase in these outlays at the end of the 15

year compact period. I also understand that as far back as 1947,

we said it was a goal of the United States or we were committed

to self sufficiency. Yet they tell me that particularly in the Marshall Islands, that per capita income is $1,600, factoring in compact

payments, but only $200 to $600 without it. Is self-sufficiency a realistic goal? Are some of these people in areas becoming more dependent? Why the increase that you project?

Mr. STAYMAN. First, that issue, the increase in the last 2 years

is a consequence of a provision of the compact itself which provides

a separate formula for funding in what are essentially the two contingency years. We had a formula which covered the 15 year term.

Then there is a 2-year contingency period if the negotiations should

not be concluded. The formula for funding in those 2 years is tied

to the average for the preceding 15 years, which was in fact a declining amount. So simply the provisions of the compact provide for

a step-up in the last 2 years. That was the way it was negotiated.

Your more fundamental point about self sufficiency I think is an

important one. I for one believe that complete self sufficiency is not

a realistic goal. We have to recognize that these are small resource

poor countries in very remote regions of the earth. There will either

always be a need for some kind of outside subsidy, that doesn’t necessarily mean a U.S. subsidy, and there will probably be a continuing pattern as we see throughout the region, of out-migration.

There is simply not enough land or enough jobs to provide the opportunity for all of the people.

Having said that, one of the goals that I would like to establish

in renegotiation is to the extent we can use U.S. money as efficiently as possible and achieve the maximum level of self sufficiency, we should do that. But we have to be cognizant of the fact

that by emerging as independent nations, the Freely Associated

States can now tap into other sources of funding and programmatic

assistance. They have not been as aggressive as they could be in

doing that. I mentioned briefly in my statement developing the

linkages with ADB. I think it’s important to recognize that the U.S.

isn’t the only provider of assistance.

Mr. DUNCAN. Let me ask you very quickly about a couple of other

things. In some of the materials provided to me I saw that the re-
32

quirement for essential air service has ended and that the flights

to the Marshall Islands have been reduced to two a week. I know

that most of the people in these areas are heavily dependent on air

travel. Is that going to be a problem or is there work being done

to try to get more air service to these islands?

Mr. STAYMAN. Let me say it is not only going to be a problem,

it is a problem. The two primary opportunities available for economic development are fisheries and tourism. It is hard to find

tourists who are going to go to an area where there are only two

flights a week. This is one of the areas of economic development

that I think we should look at very carefully as we approach the

renegotiations. Because if you believe that you have to maximize

the benefits from fisheries and tourism, you really have to resolve

this problem. It is already affecting our ability to deliver mail in

a timely manner. Again, businesses don’t like to be confronted with

problems like that. It makes it extremely difficult to get outside investment.

Mr. DUNCAN. Mr. Campbell, let me ask you this about defense.

We have been closing bases around the world. You stressed the

strategic importance of some of these areas. What are our security

obligations to them? You stated how valuable they were to us.

What are our security obligations to these islands? Also, do you

foresee a point at which we would need to build some type of military base or facility in the Pacific some place and use one of these

areas?

Mr. CAMPBELL. Thank you, Mr. Chairman. I think Assistant Secretary Roth stated it very succinctly, and it’s in my statement as

well. Our security and defense commitment to the Freely Associated States is absolutely unique. It is deeper and more profound

than we have made to any other alliance, including NATO. We protect and secure, we take steps to do so in the Freely Associated

States as we would defend a piece of U.S. territory, continental

U.S. territory. We believe that that is a fundamental commitment

that will endure in our relationship as we go forward.

On the question of, as you can imagine, Mr. Chairman, the question of bases in Asia is a very sensitive topic. Chairman Bereuter

has had a number of hearings on this. What we tried to do, given

the fact that there are often difficulties and sensitivities associated

with the creation of major permanent facilities in the Asia and Pacific region, and again, and we also suffer from the tyranny of distance and costs associated with the maintenance of these bases. We

put more stake and influence emphasis now on patrols, on deployments, on temporary and short-term deployments than we do on

permanent basing of facilities.

We have major military facilities, permanent major military facilities in Asia now in only two countries, in Japan and South

Korea. However, we have increased substantially our training and

our deployments throughout the Pacific and the Southeast Asian

region over the last 4 or 5 years. I expect that will continue.

So to answer succinctly your question, I believe that our access

and our training will continue and perhaps even increase in the

immediate future. I can not state here that I foresee a period in

the future where we will want permanent military facilities in the

FAS. No, I can not.
33

Mr. ROTH. This is a big change from 15 years ago, when we were

contemplating the possibility that we might want to do something.

In fact, we were doing actions in several places, leasing land in

Tinian negotiations, the whole Compact arrangement with Palau

because we were worried about possibly losing access to the Philippines. So this is a major change in the situation.

Mr. DUNCAN. All right. Well, thank you very much, gentlemen.

We want to move onto the second panel, but thank you very much

for being with us. It’s been a great honor and privilege to have you

here.

We will call forward at this time panel No. 2. The second panel

consists of the Honorable Asterio R. Takesy, executive director,

Joint Committee on Compact Economic Negotiations of the Federated States of Micronesia. He is accompanied today by the FSM

Ambassador to the United States, the Honorable Jesse Marehalau.

The second panelist is the Honorable Phillip Muller, who is minister of Foreign Affairs and Trade, Republic of the Marshall Islands. He is accompanied today by the Marshall Islands minister

of finance, Tony DeBrum. Also in the audience is RMI Ambassador

to the United States, the Honorable Banny DeBrum. The third

panelist will be the Honorable Hersey Kyota, Ambassador of the

Republic of Palau, who is also accompanied by other Palau embassy officials in the audience.

Let me welcome all of the witnesses, and say to you that we are

honored to have you here with us today. I will remind all of the

witnesses that we do limit the witnesses to 5 minutes, the 5

minute opening statements. I will call on the witnesses as listed in

the call of hearing. That means that the first witness will be the

Honorable Asterio R. Takesy, who is the executive director of the

Joint Committee on Compact Economic Negotiations.

Mr. Takesy?

STATEMENT OF HON. ASTERIO R. TAKESY, EXECUTIVE DIRECTOR, JOINT COMMITTEE ON COMPACT ECONOMIC NEGOTIATIONS, FEDERATED STATES OF MICRONESIA, ACCOMPANIED

BY JESSE MAREHALAU, FEDERATED STATES OF MICRONESIA AMBASSADOR TO THE UNITED STATES

Mr. MAREHALAU. Mr. Chairman, my name is Jesse Marehalau,

the FSM Ambassador to the United States.

Mr. DUNCAN. Are you going to give the statement?

Mr. MAREHALAU. He will. I am just introducing him, sir.

Mr. DUNCAN. Right. Oh, OK. Thank you very much.

Mr. MAREHALAU. I would like to introduce Mr. Takesy, former

secretary of development and resources, former secretary of foreign

affairs, and now currently serving as the executive director for the

Joint Committee on Compact Economic Renegotiations, who will

present our testimony.

Mr. DUNCAN. Well, thank you very much, Mr. Ambassador. Certainly we are pleased to have you here with us today.

Mr. TAKESY. Thank you, Mr. Chairman. First I want to thank

you very much for holding this hearing to give us an avenue to relate to you what we have done under the compact. Mr. Chairman,

my written statement is just a little over 5 minutes, so to adhere

to your rules, I will summarize.
34

Mr. DUNCAN. That’s fine. Go right ahead, if it runs slightly over.

Mr. TAKESY. Mr. Chairman, first I would like to thank you very

much for the assistance that you have given us in the work on the

Pell Grants, which are very, very essential to the well-being and

for the education of our young people. We thank you very much for

that.

Second, I want to bring to you as my president has been here

earlier in the week, in the month rather, he was here to express

to you, to the government, at the very highest level to underscore

the value that we attach to the compact. It is an expression of collective interest, of mutual interests between our two countries. We

certainly want to underscore that to you in these hearings.

The FSM views the success of the compact in other ways. The

cornerstone of course of our relationship is in the security and defense areas. We have over the 10 years or so, have adhered very

strictly and have carried out our responsibilities under the compact. For instance, at the United Nations, we have allied ourselves

very closely with the United States in its voting on very critical

issues at the United Nations such as on the Middle East, on Israel,

and we have elected to abstain from joining organizations or conventions that the United States has viewed as contrary to its interests, and therefore our interests, such as the Nuclear Free Zone of

the Pacific, and the Land Mines Treaty Convention.

Our annual meetings between our two countries on military affairs have had a very smooth holding. The presence of the CAT

teams in Micronesia are very much appreciated, and a demonstration of the good will between our two countries. The meetings that

we have had are of course done either in our country or in Honolulu. We appreciated this because it gives us an avenue to see firsthand the security setup and the world situation that we periodically receive from SINCPAC.

As you know, Mr. Chairman, there is an elaborate conflict resolution clauses under the compact. They were negotiated over long periods of time and very acrimonious at times. I personally was involved in that and I spent quite a number of weeks here in Washington, DC, in climates that are not very conducive to my thin

blood from the Pacific. But not once have we resorted to these articles. The relationship we have carried out. Where we have some

differences we were able to resolve them amicably without resorting to any conflict provision.

The defense arrangement under title III, Mr. Chairman, is something that we are very satisfied with and are fully committed to for

our own interests as well as for the United States and security of

the region. We are very happy to contribute to that. My president

in his meeting with Assistant Secretary of Defense, Mr. Kramer,

reiterated our offer for prepositioning of military forces in the lagoons of our waters.

I would like to address a point that was raised by my good friend

from Guam, Congressman Underwood, on the fisheries issue because it has been a point of some contention between us. The point

of the matter is, Mr. Chairman, it is one of the very few resources

we have, and we have approached it in as responsible and as economic a manner as we can.
35

Let me just point out some statistics for this Committee so there

is expected. The income that is generated in the territory of Guam

as a consequence of the transshipment of fisheries that are generated not only from the FSM but from Marshalls and Palau, is

some $240 million. Now, Mr. Chairman, what we receive in my

country by way of fee for licensing these vessels, and they are fishing in our waters, not necessarily in Guam’s water, is some $20

million. Now what we are doing is instituting arrangements to

maximize and to increase the income from these resources. We

would like to continue to work with our friends from Guam in seeing how best we can mutually together benefit from these resources.

Mr. Chairman, the important cornerstone of our relationship

from our viewpoint is of course economic self-reliance. That is going

to be sometime, Mr. Chairman, to come. As has been pointed out

by previous speakers, we are a resource-poor country. We have tremendous constraints that must be overcome. We are very far from

markets. We are geographically scattered and dispersed. We have

great distances to cover, even within our own country. We have

1,800 miles across and most of our territories are under water.

The funding that we have gotten under the compact admittedly

has not been put to the best use as one would expect, including us.

But having reviewed what we have and seeing that what we started were not so well-thought-out, we have begun 3 years ago to take

a re-look at things and reorient. So we have begun a restructuring

and reform. I am happy to report, Mr. Chairman, that that exercise

is well along its way. We hope to be able to accomplish that sometime next year.

As a matter of example, the state of Chuuk, as many of you

know, was in very deep trouble in terms of deficits. Today it is paying its debt and there is no reason to expect that it can not continue. In fact, they have just appropriated additional funds last

week. This money will be used to pay out its foreign debts as well

as domestic, so that by June of next year, Chuuk will be in the

black.

Mr. Chairman, the assistance that we are receiving in our restructuring is done by an independent group that is funded by the

United States, Japan, and the Asian Development Bank. It is being

administered by the bank. It is a two-pronged approach. That is to

produce an environment for private sector growth, and at the same

time, reduce costs and downsize the public sector. As you well

know, it is the biggest employer in the country.

Now it is going to take some time for this exercise to produce

some positive results, but presently we are encouraged by what has

happened. More importantly, there is political will behind it. The

people have warmed up to it and there is wide consultation among

ourselves as to the wisdom and the suffering that we must undertake in order to produce some positive results.

As an example, we have actually downsized the public sector

some 20 percent. We have laid off about 1,200 people from the payroll. We have reduced the wage by some 20 percent. We have also

frozen increases, promotions, and we are attempting to privatize or

corporatize many of our utilities and other services and activities

by the government.
36

We are also attempting to improve our tax structure. Next month

our Congress will tackle that. We have improved its administration. I am happy to report that there has been some marked increase in the revenue.

Mr. Chairman, the 15 years of funding under the compact is of

great value to the FSM. But as I have stated earlier, it is not going

to be enough for us to achieve the measure of self reliance that we

had anticipated. In fact, there is relevance and reference in the

compact itself, acknowledging that fact so that the renegotiations

are built in, because we did not and could not envision that in 15

years we would achieve a level of self reliance or economic development that can generate total revenue for needed public services.

Mr. Chairman, let me summarize for you what we are doing to

prepare for these negotiations. Last year this month, we organized

a Joint Committee on Compact Economic Negotiations, consisting

of members from across the nation, at state and national level,

from executive and legislative. The chairman of this group is the

Honorable Petrus Tun, who is our former vice president, the first

vice president. It is served by a full-time secretariat that is headed

by me. We are served by an attorney, economists, and other consultants on areas that are of concern in the next—in renegotiations.

Mr. Chairman, I would like to end by stating that some in your

country have viewed the funding under the compact as foreign aid.

Others have described it as rental for defense purposes. Some have

labeled it other ways. But for us, we view this is as this the mutually beneficial relationship. This is the unique cornerstone for us.

We view this as a partnership in development for self-reliance and

security.

Mr. Chairman, I thank you very much for allowing me to appear

before this Committee. We in the FSM welcome this dialogue. We

would like to provide this Committee, including the administration,

information that they may wish from us. We look forward to the

renegotiation.

[The prepared statement of Mr. Takesy may be found at end of

hearing.]

Mr. DUNCAN. Thank you very much, Mr. Takesy.

The next witness as listed in the call of the hearing is the Honorable Phillip Muller.

Mr. Muller?

STATEMENT OF PHILLIP MULLER, MINISTER OF FOREIGN AFFAIRS AND TRADE, REPUBLIC OF THE MARSHALL ISLANDS;

TONY DEBRUM, REPUBLIC OF THE MARSHALL ISLANDS AMBASSADOR TO THE UNITED STATES

Mr. MULLER. Thank you, Mr. Chairman. Mr. Chairman, I wish

to request that the full text of my statement be made a part of this

proceeding.

Mr. DUNCAN. The full statement of all the witnesses will be

placed in the record.

Mr. MULLER. Let me begin by stating that my government remains fully committed not only to preserve, but to strengthen our

close friendship with the United States. At this time I would like
37

to discuss with the Committee three major points that are of great

interest to the Marshall Islands.

First, the value the RMI places on our bilateral relationship. Second, U.S. Government concerns about fiscal management in the

Marshall Islands. Third, difficulties the RMI is facing in implementing certain provisions in the compact.

The RMI provides tangible concrete commitments to support the

United States military interests. We provide U.S. strategic denial

rights over one million square miles of the Central Pacific. We extend this right to the U.S. in perpetuity. We provide land for new

launch sites when requested. Our Marshallese citizens serve in

every branch of the U.S. armed forces. In exchange, the U.S. provides generous levels of social and economic assistance to the RMI.

The point I want to stress here is that we can not examine the

compact program by program or to dissect it into separate pieces.

The compact has to be seen as a whole package of corresponding

military, economic and social assistance. I find one particular passage in the Mutual Security Agreement, the subsidiary agreement

of the compact, to reflect this principle particularly well. This passage reads as follows: ‘‘The Government of the United States and

the Government of the Marshall Islands recognize that sustained

economic advancement is a necessary contributing element to the

mutual security goals expressed in this agreement.’’

I have attached resolution 67 to my written testimony, a resolution that Nitijela passed on February 5, 1998. This resolution

serves as another example of the RMI’s concrete commitment to its

bilateral relationship with the United States. It expresses the importance the RMI government attributes to our strategic partnership. I was extremely pleased to see that these same elements and

sentiments were reflected in the joint resolution introduced by the

chairman of both committees holding this hearing, as well as our

good friend, Congressman Faleomavaega.

We understand that some people in the U.S. Government have

concerns about fiscal management in the RMI. We acknowledge

that there have been a number of problems with our financial management and budget execution. We would like to put this discussion in context.

During the trusteeship, the Marshall Islands was deemed a secure area by the U.S. administrators. Until 1968, outsiders could

not visit the Marshall Islands without first obtaining permission

from the U.S. Navy. Until 1973, no foreign investment of any sort

was allowed in the Marshall Islands. Most of the compact money

we now receive goes to pay debts from loans that were necessary

to create as well as to upgrade the economic infrastructure we inherited from the trust territory government.

After devoting our attention to infrastructure, we moved to economic development projects. Some of our efforts have worked, such

as our ship registry program, the National Telecommunications Authority, and the Marshalls Energy Company. Still other projects

were admittedly over ambitious or as we found out inappropriate

for the Marshall Islands. In 12 years time, however, we can not be

expected to achieve the economic development that U.S. strategic

interests and trusteeship policies intentionally thwarted for decades.
38

As for financial management, we had to struggle to improve a

system of accounting we inherited from the trusteeship that consisted primarily of pencils and papers. Because we had no system

to properly audit expenditures, we could not effectively assure accountability. Consequently, some moneys in the compact were not

used as effectively and efficiently as they could have been.

The Auditor General’s office, together with Deloitte and Touche,

has been working steadily over the years to improve our audit and

reporting system. We are seeing improvement. For example, I am

now happy to report that satisfactory arrangements have been

made to complete the important Ebeye Hospital construction

project.

Like the U.S., we also have concerns about aspects of the compact related to the implementation of programs. Problems have

emerged when essential provisions, such as the Immigration and

Labor Rights, are constrained and compromised by laws or regulations passed without considering the special rights that the compact provides to each of our nations.

Other provisions in the compact have never been implemented.

Some programs are not provided because U.S. agencies lack proper

understanding of their obligation to extend services we are eligible

for. We also believe that loss of certain economic trade and tax provisions prevents both U.S. and Marshallese companies from opportunities to jointly expend our economic interests. After the

Marshallese electorate overwhelmingly approved the compact, a

number of economic incentives were unilaterally removed by Congress. Just yesterday the essential air services provision, an integral part of the compact, expired. This provision ensured an adequate level of air service between the Marshall Islands and the

United States. This arrangement should continue.

Mr. Chairman, if you would bear with me, I think the most important part of my testimony I am going to provide at this time.

Mr. DUNCAN. Go ahead.

Mr. MULLER. This is on the section 177 agreement. Thank you.

Section 177 of the compact has proven to be manifestly inadequate.

Section 177 fails to recognize the full scope of radiation injury in

the Marshall Islands. The United States conducted 67 nuclear

tests, yet only people exposed to one of these tests, the Bravo shot,

are considered ‘‘exposed’’ to radiation. As a result, only 174 people

are defined as exposed and eligible to participate in a Department

of Energy medical program.

The Nuclear Claims Tribunal lacks the funds to pay personal injury claims that are awarded. Because personal injury awards have

depleted available funds for awards, the tribunal will have no

funds for land damage awards.

There are also problems with the 177 health care program. Unlike other programs in the compact, there is no inflation adjustment. The program’s ability to provide much needed medical care

to four of our atoll populations is also hampered by over enrollment. Eligibility is a complex issue, however, because of land

claims and limited health services care. We wish to study this issue

and report back to Congress and the administration.

There is also a gross inequity in the way the U.S. Government

deals with downwinders in the United States and people affected
39

by radiation in the Marshall Islands. The cumulative yield of the

testing in the Marshall Islands is 100 times greater than the yield

of the U.S. tests in Nevada. Yet the area in the United States considered exposed by radiation from the Nevada tests is four times

as great as the legally defined exposed area in the Marshall Islands. American citizens also receive a one-time full award for their

radiation injuries. Marshallese often die before they receive the

majority of their award. I would like to ask your support, Mr.

Chairman, in securing an immediate ex gratia payment consistent

with the compact for the victims dying of radiation related illnesses.

Fortunately there is a provision in the compact that allows Congress to work within the purview of the existing bilateral framework to respond to shortcomings in U.S. efforts to address problems resulting from the U.S. nuclear weapons testing program.

This provision, the changed circumstances provision, require that

there be one, new and additional information, two, that additional

information was not known during the negotiations of the compact,

and three, that the new information renders section 177 manifesting inadequate.

We believe it is in the best interests of both nations to deal with

problems in the existing framework of the compact. This issue can

not wait for renegotiation because these are current obligations

under the existing compact.

Finally, Mr. Chairman, I am confident that the upcoming negotiations with the United States of certain elements of the compact

will provide the constructive process to reflect our shared commitment to the relationship. We hope these discussions will commence

as soon as possible.

Thank you, Mr. Chairman. My colleague Mr. DeBrum and I will

be prepared to answer any questions you may have. Thank you.

[The prepared statement of Mr. Muller may be found at end of

hearing.]

Mr. DUNCAN. Thank you very much, Mr. Muller.

Our next witness will be Ambassador Kyota. Mr. Ambassador?

STATEMENT OF HERSEY KYOTA, PALAU AMBASSADOR TO THE

UNITED STATES

Ambassador KYOTA. Thank you, Mr. Chairman. Good afternoon

to all the distinguished members of the Committee. It is indeed a

pleasure and a privilege for me to testify today on behalf of our

President Nakamura and the government of Palau.

Before I proceed, Mr. Chairman, I believe it is worth noting that

today, October 1, 1998, the Republic of Palau celebrates the fourth

anniversary of its Compact of Free Association with the United

States. On this special day for Palau, it is only fitting and appropriate that I express our gratitude and appreciation to the Congress for passing the original compact legislation in 1986, and also

a special gratitude and appreciation to former President Ronald

Reagan, for signing the measure into law, which really set the

stage for our independence. Also appreciation and gratitude is due

to President Bill Clinton for signing the bill in 1994 to specifically

put the Compact of Palau into effect. Of course the bottom line is
40

to thank the U.S. Congress for working so hard and patiently to

make our dream a reality.

Mr. Chairman, the relationship that exists between our countries

is the greatest gift to Palau, or any country for that matter. We are

grateful, Mr. Chairman, not only for the many benefits extended to

Palau in the Compact of Free Association, but even more so for the

countless assistance that has been so generously provided to Palau

for many, many years since the end of the war. Because of the assistance and the special relationship that exists, Palau considers

itself as a member of the American family.

I would like to analyze that in a Palauan way. Based on our

strong culture and traditional values, if one family offers help, generous help and assistance to another family, the normal thing for

that beneficial family is to wrap itself to the circle of the providing

family. That way, the family who benefited can reciprocate within

its means necessary to nurture and foster the relationship.

In our relationship, Mr. Chairman, U.S. extended economic assistance to Palau in exchange for military land use rights, services

of our people in the armed forces of the United States, and our continuing support to the United States in the United Nations, in

other international organizations and forum. Mr. Chairman, I hope

that explains why 4 years into our independence, our people still

believe and consider Palau as a member of the American family.

Mr. Chairman, I must thank you and your colleagues for passing

the Higher Education Act the other day which includes extension

of FAS students eligibility for Pell Grant assistance until the year

2004. While I welcome and appreciate this extension, I am a bit

disappointed as I fail to see the rationale for ending the eligibility

of Palauan students in the year 2000, when in fact Palau would

still have 5 years remaining in our compact economic assistance. I

hope, Mr. Chairman, that the facts surrounding this issue will be

carefully reviewed so that a fair and equal treatment may be extended to Palauan students for the duration of our compact economic assistance. I think, Mr. Chairman, a 15 year assistance in

eligibility for Pell Grants is all we need and ask for today.

Of the compact, we are very grateful for this Committee and the

Congress for assisting us to improve specifications and quality

standards of our Babeldoab Compact Road. As you know, Mr.

Chairman, the original road in the compact was of poor quality,

way below standards. But because of members like yourself and

others in the Congress who worked very hard for this compact

road, Palau will be the proud owner of a much better, bigger, and

high quality concrete asphalt road that will last for a long time.

Now to further ensure the quality and safety standards of the

road, our government requests your government in funding a team

of highly qualified professionals to oversee all aspects of the road

construction on our behalf. We initially planned to fund this team,

but due to unexpected and unfortunate collapse of the Koror Bridge

in 1995, we don’t have the means or the resources adequate enough

to fund this team. We sincerely ask for your support in this request.

We ask also this Committee to assist in securing the necessary

funding for the International Coral Reef Center in Palau. As you

may know, this project is a tripartite undertaking as a result of
41

U.S.-Japan common agenda on global environmental issues. Palau

was chosen as a site for the center. Under the memorandum of understanding signed between the three nations, each nation must

bear a responsibility for this center. To date, Palau and Japan have

fulfilled their obligation. Unfortunately the United States has not

committed any funding or financial assistance toward this project.

Mr. Chairman, I think this is a worthwhile project. We ask your

assistance for this project.

We ask, Mr. Chairman, that also a representative from your government and our government meet sometime soon to review and

reassess the importance and needs of certain Federal programs and

assistance that have been phased out or terminated pursuant to

the terms in the compact. As you, Federal programs have been the

backbone of the success of our institutions in Palau. I would ask

the representative to meet to assess this Federal program in order

to determine whether they should continue or not.

Mr. Chairman, another very important issue which still remains

unresolved is the U.S. Government financial obligation to the

former trust territory prior service trust fund. The Congress, as

you may be aware, appropriated initial funding of $8 million for

this program, with a remaining balance of $19 million to be appropriated later. The U.S. Government has not fulfilled this obligation

yet after numerous requests from the government of the former

TPI. The program, as you can imagine, is experiencing problems in

meeting regular payments to the beneficiaries. I understand, however, that some Members of Congress have indicated their willingness to fulfill this obligation over a period of several years. We welcome that, Mr. Chairman.

Mr. Chairman, I believe these requests are reasonable and well

within the scope and boundaries of the compact. I ask that you

take the lead in resolving or funding them. I thank you, Mr. Chairman, for inviting us to share our views on a number of important

issues. Thank you.

[The prepared statement of Ambassador Kyota may be found at

end of hearing.]

Mr. DUNCAN. Thank you very much, Mr. Ambassador, for your

testimony. I want to thank all of the witnesses.

I want to turn now at this time to Chairman Bereuter for any

comments or questions that he might have.

Mr. BEREUTER. Thank you, Chairman Duncan. Thank you very

much, gentlemen, for your testimony. I have a couple of very specific questions which may surprise you a bit.

To the representatives of the Federated States of Micronesia. Tell

me the age, the relative age of the hospital that exists on Pohnpei.

What would be your guess?

Mr. TAKESY. Mr. Chairman, the hospital is approximately 15

years old.

Mr. BEREUTER. The question I would ask for any one of you who

wishes to respond to this question, to what extent are capital facilities, buildings now being built with compact funds from the United

States? Is this still ongoing and occasionally there will be a construction project for a specific building? Is this exclusively the decision of the Federated States or the Marshall Islands or Palau or

is it a mandate?
42

Mr. TAKESY. Mr. Chairman, speaking for the Federated States,

the compact calls for a 60–40 split in the funding in the current

account and capital account.

Mr. BEREUTER. And who makes the decision about what buildings will be constructed? Is that a decision that you would make,

for example, in the Federated States?

Mr. TAKESY. That is correct, sir. The choice of what buildings to

build are actually decisions reserved to the states within the Federation and at the national capital where the capital complex is. It

is in compliance with a development plan that we have developed

and submitted to the U.S. for approval.

Mr. BEREUTER. Now when you were a trust territory, and that

hospital was built for example, were the plans for that hospital prepared by a consultant, engineer, architect chosen by the Interior

Department or by the Federated States, which didn’t exist at that

point?

Mr. TAKESY. They were done by the trust territories.

Mr. BEREUTER. I recall seeing a development plan for the Federated States that called for a very elaborate capital structure. I

was concerned about what a large part of the resources you were

going to be devoting potentially to that project. What happened?

Does it exist today? What can you tell me?

Mr. TAKESY. I am happy to report that the capital was built

under budget. Unfortunately the construction company that bid the

project actually was a Korean company and I think they lost money

on the deal, but the project has been completed and I am happy

to report that it is being complimented by many people within the

area as conducive to the environment and meeting the needs of the

nation.

Mr. BEREUTER. Generally I am very discouraged with the way

that construction projects and plans were let during the period

when the Interior Department was in charge, because I felt that

there were a variety of disreputable companies that were pursuing

energy development projects in particular, which I thought were

not very cost effective, and probably not a very good business deal.

I was concerned when I saw the hospital of Pohnpei, for example,

that had been designed almost as if the tropic environment did not

exist. Relatively speaking, the Japanese and even before them the

Germans, given the advance in building technology were building

more tropically sensitive buildings than were being built and

turned over to you. So that is one of the reasons I am raising this

question.

If I could just ask a couple questions to representatives of the

Marshall Islands. Chairman Duncan mentioned before what a large

part of the per capita income seems to come from compact payments or government, and questions about what this does to the

potential self-sufficiency of the Marshall Islands. I understand that

increasingly people outside the Marshall Islands are moving there

to do much of the private sector work. That would seem to have

implications that the Marshall Islanders could be a minority in

their own country. What would you say about that issue?

Mr. MULLER. Mr. Chairman, let me try to answer that in a couple of ways. First, I think it is important for us to make a distinction with the fundings that come under the compact to the Mar-
43

shall Islands because a number of those fundings are earmarked

for payments for the use of lands that the military uses and also

payments to victims of the nuclear testing program. I think sometimes there is a misconception that all that money comes to the

government for its spending. Those moneys go to the individual

families and persons to compensate——

Mr. BEREUTER. Yes. I do understand that. But tell me about the

allegation that much of the private sector work today in the Marshall Islands is being conducted by non-islanders, non-Marshall islanders, and the result is that the private sector can not become

competitive as long as government pays so much more than the

private sector.

Mr. MULLER. Mr. Chairman, let me answer that question by saying that when our government came into existence, most of our

training of the labor force was very minimal. At the beginning of

the compact, we needed assistance from outside labor to assist in

our development, economic development.

I am happy to say that we have been undergoing a number of

programs to train and to retrain a lot of our young people to be

able to get into the private sector programs and services. Still at

the same time, we look to outside assistance, especially in specialized training to assist us, especially in construction and fisheries

areas and technology. But there is a conscious effort on our part

to provide as much training to allow for our people to get into the

labor market.

Mr. BEREUTER. Mr. Chairman, if I could have unanimous consent

for one more question, I would appreciate it.

I had the misfortune of visiting Ebadon in the Marshall Islands

when I was there. It has, at that time it had at least the highest

per capita per square mile, I should say the highest population per

square mile in the Pacific. I was ashamed to see that area under

the American flag at that time. I understand that families were attracted there, extended families because of the higher wages being

paid at Kwajalein. But still the conditions there were so bad for the

population that I was ashamed to see American flags over it. I hope

that conditions are improved there now. If not, I would like your

suggestions about what the United States Government’s responsibilities are through the DOD, which is the major source of employment for at least the breadwinner on Ebi.

Mr. DEBRUM. Mr. Chairman, first let me say that we agree with

Chairman Bereuter on his assessment that too many of the

projects, construction in the past were designed by outside engineers not familiar with the needs and the climate conditions in our

area. For that reason, many of the original infrastructure built by

the trust territory had to be replaced by early compact funding.

On the specific question of Ebi, yes, Ebi has and continues to be

a problem. Although we try our best to make sure that we alleviate

the problems associated with housing, with sewer and water, and

with power, there’s still a limited availability of the basic power

and water requirements. We are still trying to deal with a hospital

construction project that went awry not too long ago. We are hopeful that we can complete that very soon.

Putting 15,000 to 18,000 people on 56 acres of land is extremely

difficult to do and does cause problems, as the chairman described.
44

There are also problems associated with people being moved from

the mid corridor and the military areas of Kwajalein onto Ebi with

promises of housing, electrical and water supplies, for which the

DOD was originally responsible, but have not committed money or

services provide. We are trying to work with the military and with

DOD to solve that problem now.

But under the new administration and government, we are also

concentrating a great deal more money and more attention to Ebi

to deal with this problem.

Mr. BEREUTER. Thank you, Mr. Chairman.

Mr. DUNCAN. Thank you, Chairman Bereuter.

Mr. Faleomavaega?

Mr. FALEOMAVAEGA. Mr. Chairman, at this time I would like to

defer to my friend from Guam.

Mr. DUNCAN. Mr. Underwood?

Mr. UNDERWOOD. Thank you, Mr. Chairman. I want to extend

my warmest greetings to all my fellow Micronesians. Thank you

very much for your testimony.

It’s just a general question. I have one general question to ask

all three governments. That is that there has been a great deal of

discussion about the nature of compact assistance which is after

all, primarily the basis for any renegotiation as what kind of assistance will be given. In general, as I understand it, it’s been characterized, much of the assistance that has been given has been characterized as being ineffective because it was tied quite often to specific domestic U.S. type programs, and perhaps there is more interest in trying to give more general assistance or perhaps some kind

of novel approach to any level of future assistance. Perhaps I would

just like to hear some of your thoughts on that.

Maybe we’ll start with the FSM.

Mr. TAKESY. Thank you. Congressman, as you well know, these

Federal programs are of course conceived in the country for needs

that are specific to an urban and very elaborate program. As you

well know, in our areas, they vary even from the state centers to

the rural areas. Dealing with these programs are very costly for us

from an operational viewpoint, because it takes special expertise to

even apply and to execute these programs and then account for

them. So that is one side of it that we are finding difficult to live

with. The standards are of course based on this country’s standards, and they don’t at times don’t quite fit into our area.

But having said those specific problems, the impact of Federal

programs on the well-being of the Federated States has been quite

positive. On the whole, it has been positive. The area that I think

can be improved is perhaps in the administration and streamlining

of some of the regulations and administration of these programs.

Mr. UNDERWOOD. Thank you very much.

Mr. DeBrum?

Mr. DEBRUM. We see a continuation of U.S. programs such as

FEMA, Farmers Home Administration, Rural Electrification, some

of those projects to be very well worth it. The rate of success in

these programs have been very high. In education, both secondary

and post-secondary education provision of scholarships, we mentioned earlier Pell Grants and other U.S. grants, have been very
45

useful in bringing up the level of education to our country. We

think that this will continue to help.

Of course we can not go back to some of the original provisions

that were taken out by Congress because as you know, they have

been taken out for the territories as well. But we need to sit down

and figure out ways to attract American business to the islands. I

think that a marriage of economic interests may be the best way

to be self sufficient within the island.

Of course we have had increase from China and Korea and

Japan about investment, but we believe that associating ourself

with American business is probably the best way to self sufficiency.

Let me add just one more comment here. The entry provisions,

immigration and labor provisions that I know that some of our colleagues from Guam are concerned about as well, have allowed for

entry not only for education, but for labor as well to the United

States. Some communities of people from the Marshalls in the

Northwest and in Arkansas and Kansas and Oklahoma have been

very successful. We have entered not for Medicare or for social welfare, but for jobs, and are providing, citizens are providing to the

advancement of those communities in which they reside. But if

they only send back 20 or 30 percent of their income to people at

home, that is a major part of our income.

Mr. UNDERWOOD. Thank you.

Ambassador KYOTA. Thank you, Congressman. Since we are only

beginning the fifth year of our compact, we are still awaiting a lot

of programs in our area. But I would like to take this opportunity

to report that beginning today, a number of Federal programs are

going to phaseout in this fiscal year. They total up to like $6 million. As you know, that translates into many jobs and many essential services that would be lost for our people.

But if the renegotiation for our economic assistance is going to

be held let’s say next year, I’m sure we have lived more than 5

years, I’m sure we will be in a better position to give you some of

the programs that we want them to continue. That’s why in my

oral statement I requested that representatives of the U.S. Government and our representative commence a meeting sometime next

year to evaluate and to reassess the needs of those programs that

are being phased out. I know that’s not asking too much because

it is in the provision of the compact that we will review those programs in order to determine whether they should continue or not.

Thank you.

Mr. UNDERWOOD. Thank you. So next time I get in my office citizens from your area asking me to continue eligibility for certain

programs, I will refer them back to you.

Mr. DUNCAN. All right. Thank you very much.

Mr. Faleomavaega?

Mr. FALEOMAVAEGA. Thank you, Mr. Chairman. I want to again

thank our distinguished guests here before the Committee and

their fine testimonies.

I guess at the height of the cold war, by some assessment of the

officials of our government, we have decided that approximately $2

billion was supposed to be the base in terms of the kind of economic assistance as it was part of the compact agreements that

were made with the FSM as well as with the Marshalls and ulti-
46

mately also with Palau. I suspect also, gentlemen, that the question of assistance is going to be probably the soul of the negotiations that will be forthcoming in the coming months.

My question is, I make the presumption that the last or the pro- jection of the first 15 year period, that the vast majority of this $2

billion has been primarily for purposes of infrastructure development and now I suspect that perhaps another important phase of

these renegotiations. Do you suspect, gentlemen, that it’s going to

be less than $2 billion for the next 15 years or going to be more? You know, I make an observation, every year we give $6 billion

to Egypt and Israel to maintain stability in the Middle East. Now

that may not be any relation to the situation that we have in Micronesia, but I can rest assured, gentlemen, that at the height of

the cold war, Micronesia was very, very critical as far as the Department of Defense was concerned. In fact, the entire compact

during the negotiation period, Tony, you know, and Asterio, was

practically done by the Department of Defense.

I can also say as a matter of statement that the negotiations was

very much an unequal on the basis that the people that you had

to deal with were not exactly very friendly. If I would put it more

nicely, to the extent that it was almost like take it or leave it.

Thank God we had a Phil Burton there that had to constantly beat

on the administration to tell them that these are human beings.

These are not just some mechanical toys that you can play with.

I still remember the classic statement that Henry Kissinger made

concerning Micronesia. I’ll repeat it again. ‘‘Well, hell, there’s only

90,000 of them. Who cares?’’

That was the kind of attitude that you had to deal with 15 years

ago, when we talk about compact renegotiations. I sincerely hope,

and I’m sorry that the administration is not here, that we will not

have a repeat of that.

My question, gentlemen, I find it very strange that we are trying

to promote economic self-sufficiency in these three entities, and at

the same time, you are restricted to do certain things. My question

is, would you have been better off if you were never involved with

the United States in terms of where we are now? Could you have

done it on your own? Go out and negotiate with other countries of

the world and do your own thing without being colonized after 400

years? First it was the Spaniards, then it was the Japanese.

I mean the problem is, gentleman, is that many Members here

in the Congress have no concept, no idea where you were and how

you got to where you are now. It is a sad situation. I don’t fault

my colleagues. But that is the reality in fact that we deal with here

in Washington. I wish every Member of Congress could understand

and appreciate what the Micronesians have had to endure in the

last 400 years. I am sad to say I would say probably—well, look

at here. Again, I don’t fault my colleagues. This is the reality that

we deal with here in Washington.

My question, gentlemen, what is your best shot, give us your best

shot in terms of how we should improve on the compact when renegotiate in the coming months? FSM?

I’ll say one thing. I’m sorry. I didn’t mean to interfere. You know,

we have the same problems even in insular areas as you do right

now. We talk about self sufficient the last 100 years, and we’re still
47

not self sufficient. We export national football players now. I understand there are 1,000 Marshallese working for Tysons Chicken in

Arkansas making more money there than they would if they were

in the Marshalls. What’s wrong with inviting the Micronesians to

come and work here to be more self sufficient, make more money,

and the export it back to the islands? Every other country in the

world does that, with the exception maybe of our own country here.

The Philippines, a classic example. Of the 500,000 Filipinos that

work outside of the country, they bring in $8 billion plus in remittances. That has tremendously assisted that country to stay above

water, if you will. We even have Samoans who work in the logging

companies up in Montana. So I think it’s possible.

My basic concern, and I want to ask my friends here from Micronesia, I have always advocated strongly that the salvation of our

island people lies in the ocean. But I am sorry to say that we have

not even gone near, we can’t even get the Law of the Sea Treaty

approved. We have some very serious problems with that. So I

would like your suggestions on how this Committee, how the Congress could be helpful when you begin the renegotiation process.

Asterio? Jesse?

Mr. TAKESY. Thank you, Mr. Chairman. You have asked some

very profound and difficult questions, so I hope you can bear with

me. In the FSM, we view the compact as a critical component of

our effort at building an economy that will be sustainable and one

that will support our people, not only now but in the future. In

point of fact, we have begun an exercise within the JCN itself to

assess where we are in cooperation with the entire government,

where we are economically, where we hope to be, and what it’s

going to take to get us there.

This means hard economic reviews and analysis. We are not

done, Mr. Chairman. But I am happy to report that we are assisted, as I have stated earlier, by an independent team of economists funded by this country, Japan, and the Asian Development

Bank. We hope to be able to come to produce a picture that can

give our decisionmakers options——

Mr. FALEOMAVAEGA. Let me give you an example, Asterio. Look

don’t be so nice about this, Asterio. You are my brother. Look,

these fishing countries take out in excess of $1 billion worth of

tuna from our waters. What do we get in return? Pittance. I would

say that if our own island countries could even gross at least

maybe $300 to $400 million out of that $1 billion that is taken out.

I am frustrated, Asterio, help me on this. We could get the ships.

They even had the gall to say the Samoans didn’t want to go fishing because they don’t know how to go fishing. We are fishing now

the Albacore and grossing $700 million a year, and we are just

starting. You don’t need to go into pursanders that cost $12 million. We can start small. I don’t know. I am frustrated because the

resources are there. But maybe I’m wrong, Asterio. Help me on

that.

Mr. TAKESY. No. You are quite right. We have embarked on that.

But unfortunately, we embarked with the government actually directly involved in it. We are correcting that. As Tony pointed out,

there needs to be some adjustment to attract foreign investors from

this country.
48

Under the treaty that allows for an organ fleet to fish in our

zones, the entire fleet, the whole United States fleet is allowed to

come in under the treaty. It’s a very preferential treaty. Not only

that, but as you well know, under the compact, we have a 10 percent duty free processed tuna coming into this country. To this day,

we have not been able to take advantage of that. In looking back,

we can only say that perhaps this is not an attractive area for such

investors as Heinz and Starkist and Bumblebee. But the best way

for us to get into the fishing business and to reap the most from

it is to catch the fish ourselves.

Mr. FALEOMAVAEGA. You’ve got the market, Asterio. I have the

largest tuna cannery operation now in the world on my island.

Mr. TAKESY. So we need to learn how to catch. It takes capital

and it takes training, and it takes high tech to do it. As you well

know, the pursanders are the most efficient, but unfortunately,

they cost a lot of money to upgrade and to purchase. But we are

getting there. We are beginning with long lining in accessing the

high sashimi market in Japan.

Mr. FALEOMAVAEGA. Thank you, Asterio.

Tony?

Mr. DEBRUM. If I might, Mr. Chairman, we want to associate

ourselves with Asterio’s comments. We think tuna has a potential

and we think that the way to do it would be for the United States

to help us develop it, along with the other territories and the other

island countries that live off of tuna.

But if we go onto the other areas, in tourism, for example, we

have some of the best tourist destinations in the world. But those

are hampered when, for example, Minister Muller mentioned earlier, when the essential air service terminated yesterday. We can

not be sure to attract investment in the tourism business when we

don’t have control or we don’t have any real idea what the future

looks like in air travel. Air transport also plays into the tuna market. If we don’t have freight service out of the Marshalls, there can

be no sashimi market advantage taken.

Also, because of the lack of infrastructure, water and power,

tourism begins to be a difficult area to enter. However, we can go

into ecotourism. We can go into aspects of tourism that are good

for the country, good for the environment, and affordable. But

again, transport and support from investors and those people that

know how to market and know how to handle tourist facilities is

needed.

The United States mentioned earlier that they have embarked on

a program to enlist ADB support for training and for business development in the Marshalls and for working to reduce the size of

government. Mr. Chairman, as we have said before, we don’t think

governments can run business. But that works a little bit to the

other way around also. We don’t think business can run government. Sometimes we bring in experts in business from ADB who

try to chop off services in government that are still essential. We

can not continue to reduce government services in health and education in the Marshalls just in the interest of reducing the numbers

to what ADB says those numbers ought to be.

Also expertise from ADB consists largely of international civil

servants from such places as Sudan, Bangladesh, Sri Lanka, Paki-
49

stan. Although some of these people are highly trained, I have not

been able to see projects from those countries or exported by those

countries that have worked in the Marshalls. We think that our

real future in economic development is with United States business. United States business can also talk to their Congressmen.

We can’t, except for occasions like this for which we are thankful.

I think the ideas to attract American business, keep them going

in our area, and they are welcome, and we can do that very well.

Thank you very much.

Mr. DUNCAN. Thank you very much, Mr. Faleomavaega. We have

been joined by Ms. Christian-Green, and I would like to turn to her

for any comments or questions at this time.

Ms. CHRISTIAN-GREEN. Thank you, Mr. Chairman. I would like

to ask unanimous consent to enter for the record an opening statement.

Mr. DUNCAN. Yes, ma’am.

[The prepared statement of Ms. Christian-Green follows:]

STATEMENT OF HON. DONNA M. CHRISTIAN-GREEN, A DELEGATE IN CONGRESS FROM

THE VIRGIN ISLANDS

I thank you Mr. Chairman for holding this hearing today. I want to welcome my

colleagues from the International Relations Subcommittee on Asia & the Pacific, especially Chairman Buereuter and Ranking Democrat Berman. I might add that our

own Resources Committee colleague and fellow Pacific Islander himself, the Honorable Eni Faleomaveaga is a member of the Asia & Pacific Subcommittee as well.

Mr. Chairman this is an important hearing today, if for no other reason than the

fact that the Compacts we are discussing today are historic in their differences from

the other relationships that the United States has with its other non-state entities.

As a representative of one of these areas, our political status as a unincorporated

territory is often determinative of much of our political and economic growth.

Because of our status, no U.S. citizen resident of an unincorporated territory or

Commonwealth has the right to vote for President of the United States, even though

the President can order our children to go to war to defend the nation. Also, because

we do not have representation in the Senate, we are limited in our ability to prevent

the application of various laws which because of size and other factors, would severely impact us negatively.

At the same time, we are prohibited in forming the kinds of international economic alliances which could possibly enhance our economic development. And for

many of us, the opportunity for enhancing our status to statehood is viewed as not

available, at this time.

In part because of the limitations of the various territorial statuses, the idea of

a Compact of Free Association with the United States is at times viewed as appealing by many from the offshore areas. In some sense, the status of Free Association

can be seen as a possible solution to the problems of full citizenship and sovereignty

which I described in the current U.S. Territorial statuses.

And so I look forward to hearing from the witnesses today, so that I can learn

how these Compacts have worked over the last fifteen years and where we are in

the process of their renegotiation. I welcome the witnesses to that are here with us

today, especially those from the Marshall Islands and the FSM who have traveled

a very long way to get here. Thank you.

Ms. CHRISTIAN-GREEN. I want to begin by apologizing for not

being here at the beginning of the testimony because I had gone

to the White House for an event which went longer than I had anticipated. But I wanted to welcome our panel this afternoon. I

know you came a long way, but it is very important that you are

here this afternoon to give your testimony. I will be reviewing the

record so that I don’t miss anything. But I can already hear from

your responses to some of the questions and from some of the questions actually that a lot of the areas of concern, a lot of the issues

that we all have are very, very similar. It makes me wonder what
50

is the difference between being an unincorporated territory and

have a compact with Free Associated States status.

But I would like to maybe, since I don’t have a specific question,

give you an opportunity—as a new member, I still need to be educated somewhat on the process that you are going through. Maybe

there might be one particular issue that you have not had a chance

to really focus on that you might want to bring out at this time

that would help me also to understand the process of the negotiations that you are going through that you feel is of critical importance to each of the areas.

Mr. MULLER. Mr. Chairman, if I may start. I think as I mentioned in our statement, it is very important that we continue to

address the legacy and the outstanding issues that surround the

continued injuries that had been caused by the nuclear testing program of the U.S. I think to the Marshall Islands, that is one of the

main points that we would like to see that it be fully addressed and

that judged and fair compensation be finally brought to a successful conclusion.

Mr. DUNCAN. Let’s go to Ambassador Kyota for his major problem or issue.

Ambassador KYOTA. Thank you, Mr. Chairman. I did not have an

opportunity to answer to the Congressman from Samoa, questions

about fisheries and some of the most important things. So if I may,

I would like to respond to that before I——

Mr. DUNCAN. Sure.

Ambassador KYOTA. Right now we in relation to fishing, we have

two active companies doing long line fishing in Palau. The Congress in Palau, the legislator there is now considering or evaluating

whether to extend their fishing agreement or to stop them when

they expire. They are looking into a new, another means of getting

the most money out of the water. That is the sports fishing aspect,

you know, like since Palau and the rest of the Micronesian islands

are gaining popularity in tourism, becoming one of the world’s tourist destinations, we’ll get into the sports fishing. Although the

money is not as big as the fishing company, but at least the money

is given directly to the people rather than using this big fishing

company which pollutes the water, pollutes the land, and the return is very small, is very small there.

Mr. DUNCAN. All right. Thank you. Let’s go to Mr. Takesy.

Mr. TAKESY. Thank you very much, Mr. Chairman. Mr. Chairman, in our view, the one aspect of the compact that we thought

was not emphasized enough and in hindsight we’re seeing is that

there is no attention to the private sector development aspect. In

our view, this is where we should be going. In our review now, as

advised by the team of economists and in our own evaluation, attention should be paid to this area.

In that connection, Mr. Chairman, the human resources to move

the private sector needs to be trained, not only trained but specifically catered to the areas that have promise for potential, such as

my colleagues have pointed out, tourism, fisheries, and agriculture

for the FSM. This is where I thought——

Mr. DUNCAN. Thank you very much.

Ms. Christian-Green, anything else?
51

Ms. CHRISTIAN-GREEN. Thank you, Mr. Chair, for the opportunity

to ask the questions. I really do find that a lot of the issues are

very, very similar for all of us who have been in one status or another as territories to the United States. Thank you.

Mr. DUNCAN. Well, thank you very much. I think this has been

a very valuable and informative hearing. I want to thank all of the

witnesses for their testimony and the members for their questions.

The members of the Committee on Resources and the Subcommittee on International Relations may have additional questions for the witnesses. We will ask you to respond to those in writing. The hearing period will be held open for these responses.

If there is no further business, the chairman again thanks the

members of the Committee and the subcommittee and our witnesses, particularly those who traveled from Micronesia to participate. The joint hearing stands adjourned.

[Whereupon, at 4:30 p.m., the committees were adjourned, subject to the call of the Chairs.]

[Additional material submitted for the record follows.]
52

BRIEFING PAPER—COMPACTS OF FREE ASSOCIATION

The Congress approved unprecedented free association relationships with these

areas with the enactment of Public Laws 99-239 and 99-658 in 1985 and 1986. As

separate sovereign nations, these areas have their own nationality and citizenship,

are members of the United Nations, and have full diplomatic relations based on the

Vienna Convention on Diplomatic Relations. All three maintain embassies in Washington, DC, and similarly, the U.S. has embassies in the three freely associated

states with either resident ambassadors, or in the case of Palau, a charge ́, with the

ambassador being accredited out of Manila, Philippines.

The U.S. and these islands each have entered into agreements through their respective Compacts, to provide certain rights of obligations to the other party. Most

significantly, the U.S. has exclusive military rights and a legal defense veto over

third party use of any of the land, ocean, or airspace of the islands (this oceanic

exclusive economic zone comprises an area larger than the continental U.S.), as well

as access and use of certain specified land, harbor, airport facilities in various parts

of the freely associated states, and the islands have free transit into the U.S. to

work, study, or reside. The FAS also use U.S. currency and are synchronized with

the U.S. postal system rates. The Compacts also provide for economic and programmatic assistance for the FAS at varying rates.

Compacts for the Marshall Islands and the Federated States of Micronesia began

respectively on October 24 and November 3, 1986 while Palau’s Compact did not

start until October 1, 1994. Certain economic provisions of the Compact with the

Marshall Islands and the FSM are set to lapse at the end of 15 years and by law,

the Administration is to begin negotiations on those provisions in 1999. The 15 year

lease of the U.S. missile-testing facility at Kwajalein in the Marshall Islands is also

up for renewal at the same time.

The hearing will focus on the oversight of the Compacts of Free Association for

the Republic of the Marshall Islands, the Federated States of Micronesia, and the

Republic of Palau, with regards to government-to-government relations, including

mutual cooperation on defense, exclusive economic zone enforcement, transit of residents, and Federal oversight in the islands of Federal grants and programmatic assistance. In addition, the hearing will focus on the progress of economic self-sufficiency in the freely associated states, radiological rehabilitation and resettlement of

certain Marshall Island atoll communities, construction of the Babeldaob circumferential road in Palau, and Compact renegotiation plans.

STAFF CONTACT: T.E. Manase Mansur, x67400.

STATEMENT OF HON. STANLEY O. ROTH, ASSISTANT SECRETARY OF STATE FOR EAST

ASIAN AND PACIFIC AFFAIRS

Mr. Chairman, thank you for the invitation to discuss one of the United States’

most unique relationships: our relationship with the Freely Associated States (FAS).

Though poorly understood and often overlooked, U.S. ties to the three FAS (the Federated States of Micronesia (FSM), the Republic of the Marshall Islands (RMI), and

the Republic of Palau) have a long history and are an important part of our posture

in the Pacific. I personally devoted many years of my life to this issue in the mid

1980s, when, as Staff Director of the House Asia and Pacific Affairs Committee, I

worked to get the Compacts of Free Association legislation through Congress. This

process, as you know, Mr. Chairman, was long and arduous, in part because Congress had not been adequately consulted from the outset of negotiations. I thus welcome the opportunity to open a dialogue with Committee members on the state of

U.S.-FAS relations and to consult with you regarding the upcoming renegotiation

of certain provisions of our Compact with the FSM and the RMI.

My testimony today will be divided into two sections. First, I will give a brief

overview of the Compacts of Free Association, laying out the parameters which

guide these unique relationships. Second, I will reexamine what the United States

had hoped to accomplish with these Compacts of Free Association and evaluate our

success in meeting those goals.

Compacts of Free Association

The Freely Associated States were formerly part of the Trust Territory of Pacific

Islands (TTPI), a group of islands administered by the United States after 1947

under a U.N. Strategic Mandate. In 1969, the United States entered into discussion

with representatives of the various islands on their future political status, a process

which had different outcomes for the four island groupings in the Trust Territory.
53

The people of the Northern Mariana Islands opted for an association with the

United States that made them U.S. citizens. In January 1978, the United States

began administering the Northern Mariana Islands under provisions of the negotiated and Congressionally approved Commonwealth Covenant. On November 3,

1986, the Northern Mariana Islands became a Commonwealth in political union

with the United States.

The FSM, RMI and Palau, on the other hand, chose to become sovereign nations

in free association with the United States. On this date sixteen years ago (October

1, 1982), the United States and the FSM agreed to a Compact of Free Association,

some provisions of which will expire fifteen years from the date of its entry into

force. In June, 1983, we reached a similar agreement with the RMI. These Compacts were approved and enacted into law by Congress in January 1986, and endorsed by the U.N. later that year. Our Compact with the RMI thus officially went

into effect on October 21; while that with the FSM started on November 3. The Republic of Palau opted for a longer 50-year Compact which did not go into effect until

October 1, 1994 due to multiple delays in ratification in Palau.

A Unique Relationship

These Compacts established unique relationships between the United States and

these former trust territories, elaborating bilateral arrangements unprecedented in

the history of U.S. diplomatic relations. While each of the states is now sovereign

and our dealings with the FAS are no longer internal but rather foreign policy matters, our relationship with the Freely Associated States differs from those with other

nations in several fundamental ways: we provide the people of the FAS access to

direct services of over forty U.S. Federal domestic programs and to U.S. Government

funding at a per capita rate greater than any other foreign government; we take

responsibility for the security and defense of each of the island states in return for

denial of third-country access to the FAS for military purposes; and we give FAS

citizens the right to work and live in the United States as nonimmigrant residents

within the parameters laid out in the Compacts.

Towards Renegotiation

We are rapidly approaching the 12th anniversary of our 15 year provisions of our

Compact with the FSM and the RMI, and so these elements of the agreement will

soon be up for renegotiation. Under the terms of both Compacts, negotiations should

open two years before the 15th anniversary in the fall of 2001, putting us just a

year away from the start of this process. The Administration is fully cognizant of

the significance of this upcoming exercise, and we are in the process of trying to

identify the best negotiator for the job.

As we move towards the 1999 deadline, it is important that we reevaluate where

we have come from and where we now stand with the FAS. The United States entered into Compacts of Free Association with these former trust territories for two

basic reasons. First, as the administrator of the U.N. mandated Trust Territories,

the United States was obligated, and I quote, ‘‘to promote the development of the

inhabitants of the trust territory toward self-government or independence as may

be appropriate to the particular circumstances of the trust territory and its peoples,

and the freely expressed wishes of the peoples concerned.’’ In accordance with these

responsibilities, the United States moved the various island groupings toward selfgovernance, and having achieved statehood, the people of the FSM, RMI and Palau

elected a relationship of free association with the United States.

Second, in the Cold War environment of the mid-1980s, the United States was

keen to bolster its security posture in the Pacific. For much of the post-World War

II period, the United States had had unrivaled influence in the Pacific. This position

was challenged in the mid-80s as the Soviets undertook an aggressive campaign to

increase their presence in the region, concluding a fishing agreement with Kiribati

and opening diplomatic relations with Vanuatu. At the same time, consultations

with the Filipinos had already begun to cast doubt on the future of U.S. bases at

Subic, Clark and other facilities in the Philippines. For the first time in almost

three decades, then, our supremacy in the Pacific appeared to be in jeopardy.

The Compacts with the FAS alleviated this problem in three ways. First, the principle of strategic denial elaborated in the agreements with each of the three FAS

guaranteed the United States exclusive military access to these countries and their

surrounding waterways. Second, our agreement with the RMI ensured continued access to the Kwajalein military facility. Third, our agreement with Palau included

the right to develop a military base should the United States need an alternative

to the Philippines. Combined, these three components of the Compacts served to

safeguard our long-term military interests in the region.
54

As we move towards renegotiation, it is of course useful to reassess both our continued interests in, and obligations to, the FAS. First, on the strategic side. Geopolitics have changed significantly since the mid-1980s, as the Cold War is over and

the Soviet threat is no more. Nonetheless, the FAS continue to be of strategic significance to the United States. The thousands of islands of which the FAS are composed cover vast stretches of ocean and sit astride vital sea lanes. The United States

has a clear interest in keeping these sea lines of communication open.

Moreover, the FAS are located between U.S. positions in Hawaii and Guam. U.S.

defense relationships in the Asia Pacific form an arc from South Korea and Japan,

through Thailand, the Philippines and on to Australia. Guam is the forward military bridgehead on U.S. ground, from which we can leap, if necessary, not only to

Asia and the Pacific but also on to the Persian Gulf—a point aptly demonstrated

during the 1995 U.S. military action in support of U.N. sanctions on Iraq. To protect

the forward presence in Guam and beyond, the United States has a strong interest

in maintaining friendly governments and denying potentially hostile forces access

to these sea lanes. While there is currently no direct threat to these vital waterways, we can not assume that this will remain the case.

As mentioned above, the RMI is also home to the U.S. Army Kwajalein Atoll

(USAKA)/Kwajalein Missile Range (KMR). According to a DOD assessment, the

USAKA/KMR is a ‘‘national asset,’’ currently the only facility in the world with an

arena suitable for full-scale testing of long-range missiles. The study also determined that Kwajalein is uniquely situated for intelligence gathering and provides

important support for our space programs. We have, over time, invested upwards

of $4 billion dollars in this facility, and relocating would be a difficult and costly

proposal. Our lease of the Kwajalein base expires in 2001, though if we choose to

renew, our Compact with RMI provides automatic renewal rights for an additional

15 years.

On the obligation side of the coin, our position is more complicated. The United

States has clearly fulfilled its responsibility under the U.N. Mandate to prepare

these territories for self-governance. The new states have become self-governing and

responsible for their own foreign affairs. They have exchanged diplomatic representatives with other nations besides the United States and have become members of

international organizations including the U.N., the IMF and the World Bank, as

well as regional organizations like the South Pacific Forum, the Pacific Community

and the Asian Development Bank.

Still, while our legal obligation to the FAS can be said to have been fulfilled, our

moral obligation to the people on the ground is ongoing. In the original Compact

legislation, the United States pledged to help each of the three FAS move toward

economic self-sufficiency. However, despite generous financial assistance from the

United States, progress toward attainment of economic self-sufficiency has been

slow. Since our Compact with Palau will not be on the table in this round of negotiations, I will focus my remarks on the FSM and the RMI.

For years both the FSM and the RMI seemed hopelessly dependent on our provision of aid and services, unwilling and/or unable to undertake the reforms necessary

to transform their economies. Recently, the Federated States of Micronesia has

begun to make headway with economic reform, working with us, the IMF and the

Asian Development Bank to restructure its economy, downsize the national government, and privatize many governmental functions.

In accordance with IMF recommendations, the FSM Government formulated a

structural reform program which has been under implementation since 1995. Considerable progress has been made under the reform program in the past two years,

including the recent National Government Restructuring, which downsized the public sector, and the new Foreign Investment Act, which streamlined the foreign investment approval process, devolved discretionary power to the States and created

a more competitive environment for the attraction of foreign investment. Other new

initiatives have included a reform of the tax code designed to increase customs revenue, and financial sector reform, such as liberalization of interest rates.

Even with these reforms, however, there is still much to be done. Private sector

development of agriculture, fisheries and tourism is crucial for the FSM’s future viability. Growth of the private sector will require a consistent regulatory framework,

reform of the land-tenure system, continued simplification of foreign investment policy, and further reforms to the taxation system. At the same time, a comprehensive

reform of the education system will be essential if Micronesians are to attain the

knowledge base and skills training they need to move forward with reform. While

the Micronesians are on the right economic path, their ability to carry through with

such reforms might be undermined by termination of our economic assistance.

The RMI is not as far along the reform path as its neighbor. A swollen and inefficient public sector continues to swallow a substantial percentage of the budget;
55

debt-servicing requirements are greatly constraining fiscal policy; and high population growth rates, rising unemployment, and declining per capita income are placing serious strains on the nation’s social services. The government, meanwhile, has

exhausted its financial holdings and borrowing capacity and has not created a climate attractive to foreign investment. There is also controversy surrounding the

RMI’s management of funds established to provide compensation for claims related

to the 1946-1958 U.S. Nuclear Testing Program, with critics contending that manipulation of the criteria by which claimants are determined eligible for programs supported by these funds has led to an unsustainable ballooning of the subscriber base.

The Government of the RMI, moreover, has not released required annual audits on

the Fund.

Having said all that, let me stress that not all is gloomy in the economic management of the RMI. The Marshallese have undertaken a Public Sector Reform program in conjunction with the ADS, and some progress has been made, including a

25 percent reduction in civil service staff since January 1996, termination of subsidies to Air Marshall Islands, and a public sector wage freeze. Other notable initiatives have included the tariff structure rationalization carried out in FY96 and the

amalgamation of ministries which helped minimize redundancies and reduce the

range of services provided by the government. Still, I think the record shows that

it is not yet clear whether or not the RMI government is committed to genuine economic reform.

In short, Mr. Chairman, our provision of Federal aid and services has had only

partial success in fostering economic self-sufficiency. The question is, having set the

FAS on a path of economic reform, can we abandon them before their reforms are

finished? Terminating most or all of our assistance programs would likely devastate

these fragile economies, and historical ties compel us to consider the impact that

severance of aid and/or services would have on the ground. That is not to say that

we must continue to provide the FAS with more funding per capita than any other

nation in the world; our obligation to U.S. taxpayers dictates that even historical

bonds must be reexamined in light of changed global conditions and new fiscal realities.

As we move towards negotiations, then, Mr. Chairman, the Congress and the Administration must answer a number of tough questions. First, should the United

States continue to provide financial assistance and/or government services to the

FAS? If so, how much? For how long? And under what terms? Should aid continue

to be provided with the full faith and credit of the U.S. Government? Or should aid

be provided as an annual appropriation as it is with U.S. Government assistance

to other countries? It goes without saying, Mr. Chairman, that any future provision

of assistance must serve to help the FSM complete its reforms and compel the RMI

to adopt and implement more wide-ranging reforms. Past policy failures must therefore be addressed if future aid is to improve economic performance.

Finally, Mr. Chairman, let me add one thought about our unique financial obligations to the RMI relating to nuclear claims. While the implementation agreement

of the Compact with the RMI constituted the full settlement of all claims, past,

present and future, related to nuclear testing, it does provide that the RMI may

submit a request for additional compensation to the Congress under certain provisions. RMI representatives have said that additional atolls should be considered affected by the nuclear program, and that compensation for all the affected atolls

should be increased. I understand that the Marshallese are hard at work preparing

a case for additional compensation and we will of course give their materials full

consideration in accordance with our legal obligations.

Before I conclude, Mr. Chairman, I would like to emphasize that I take my obligation to consult with Congress during this process seriously. I again thank you and

the members of the Committee for the opportunity to discuss the Compacts of Free

Association today. I look forward to getting your feedback this afternoon and to continuing this dialogue as we move towards negotiations next year.

STATEMENT OF HON. KURT M. CAMPBELL, DEPUTY ASSISTANT SECRETARY OF

DEFENSE FOR ASIAN AND PACIFIC AFFAIRS, INTERNATIONAL SECURITY AFFAIRS

The Department of Defense has a deep appreciation of the current significance

and past history of our special relationship with the Freely Associated States; the

Republic of the Marshall Islands, the Federated States of Micronesia, and Palau. We

cannot, and should not, forget the price we paid in liberating these islands from Imperial Japan in World War II and the role some of the islands and peoples played

in developing crucial U.S. defense programs in the 1950s and 1960s. Our relationship is founded upon the unique role of U.S. defense responsibilities to the sovereign
56

nations of the Freely Associated States under the terms of the Compact of Free Association.

The Compact and subsequent agreements obligate the United States to provide

for the defense of the Freely Associated States in perpetuity, unless mutually agreed

upon to terminate the arrangement. We are committed to provide security to these

nations and their peoples ‘‘as the United States and its citizens are defended.’’ This

level of defense commitment goes beyond any other U.S. treaty or alliance. In return

for this fundamental security guarantee and other DOD obligations, we retain the

right for certain military uses and access, as well as the right to veto access to third

countries.

In the absence of the Compact or the Security and Defense Relations Title of the

Compact, the Mutual Security Agreement still provides for defense obligations, military access, and denial of military access by third countries. Although it may appear

that the termination of the Compact would result in little change, it is clearly in

the best interests of the U.S. to maintain the full range of military access and security engagement options the Compact provides. One of the most important aspects

of the Compact is the foundation it provides for our day-to-day working relationship

with the people of the Freely Associated States.

In preparation for the upcoming Compact renewal negotiations, the Department

of Defense has conducted a study to determine our defense interests in the Freely

Associated States for the post-2001 era. This study, which will be finalized in early

1999, has considered many issues of mutual concern, such as continued access, current and future threats, and roles the Freely Associated States may play in future

scenarios.

The overriding defense interest in the negotiations will be continued use of the

Kwajalein Missile Range and the facilities on Kwajalein Atoll. The requirements of

our missile defense and space surveillance programs combined with the uniqueness

of Kwajalein’s location, infrastructure investment, and real world treaty restrictions,

make this an issue of the highest priority.

Under the Military Use and Operating Rights Agreement, negotiated subsequent

to the Compact, the United States retains the right to automatically extend the use

of Kwajalein for an additional fifteen years to 2016. However, the Compact and use

of Kwajalein are not that easily separated. While the agreements may be negotiated

separately, proviso’s of the Compact help provide the basis for the support of the

Marshallese, who in turn provide not only much of the labor force, but also a positive local environment which is critical for continued success at Kwajalein.

If the goal of the Compact is to maintain a unique relationship with the Freely

Associated States while helping them become financially self-sustaining democracies, then a renegotiated Compact, in some form, is in the best interests of the

United States and the Freely Associated States. It will help the Freely Associated

States continue to work toward their national goals, while serving our national defense interests.

STATEMENT OF HON. ASTERIO R. TAKESY, EXECUTIVE DIRECTOR, JOINT COMMITTEE

ON COMPACT ECONOMIC NEGOTIATIONS, GOVERNMENT OF THE FEDERATED STATES

OF MICRONESIA

Mr. Chairman:

The Government of the Federated States of Micronesia (FSM) is very grateful for

the opportunity to appear before you today to discuss the Compact of Free Association and the upcoming renegotiation of certain of its provisions. We agree with the

Committee Members that it is none too early to begin sharing with you our assessment of the Compact experience thus far, and our tentative views on what may lie

ahead.

First, I should refer to the visit to Washington last month by our President, His

Excellency Jacob Nena, who came with the intention of conveying to the United

States Government personally, and at the highest possible levels, the strength of

our people’s ongoing commitment to the Compact relationship. Today I would like

to concentrate on the points that he made in a very successful series of meetings

with Administration officials and with Members of Congress. He also had the fortunate opportunity to discuss these matters at some length in a conversation with

President Clinton.

The most important point that was stressed by President Nena, which I want to

emphasize to you today, is the profound gratitude of the people and the Government

of the FSM for the assistance that the United States has extended to us over many

decades—throughout the forty years of the Trusteeship, and under the Compact.

Those of us in the current generation of government in the FSM, along with our
57

people, have grown up and lived in an emerging country that remembers past colonial rule, but has known throughout our lives the faithful encouragement of the people and Government of the United States. We realize that from your perspective this

is only a small part of your global concern, but we ask that you not overlook the

appreciation felt by the FSM people for our good fortune in having the opportunity

to model our political, social and economic development after the example of the

greatest Nation in the world.

More particularly, the FSM remains grateful for the strong support given by the

United States, from the very beginning of our Compact relationship, to the FSM’s

emergence into full sovereign statehood within the international community. This

consistent support has played a significant role in what we believe to be the Compact’s great success, and in the fact that the relationship of Free Association remains strong.

One indication of the strength of the relationship is that the FSM has steadfastly

supported the positions advanced by the United States at the United Nations and

elsewhere in the international community, even when our positions have occasionally placed us at odds with our developing country partners and some of our fellow

Pacific Island countries. Another is that despite the presence within the Compact

of elaborate dispute and claims resolution procedures, which were forged out of

months of intense debate during the original Compact negotiations, there has not

been a single instance when any difference of views between our governments could

not be resolved through informal discussions. This is testimony to the dedication of

all our respective officials who have worked under the Compact through the years,

and to the fact that the guiding document is a sound expression of common interests.

We are keenly aware that strategic and security considerations are the cornerstone of our free association relationship with the United States. Thus, we have

worked hard to give more than just lip service to the responsibilities we assumed

in the Compact. The FSM has been strictly supportive of United States defense and

security policy in the Region, such as, for example, by refraining from joining its

neighboring island countries in the South Pacific Nuclear Free Zone Treaty

(SPNFZ), and by refraining from signing the Convention against Land Mines. Our

consistent support for the State of Israel, while motivated in part by internal considerations, has also been with an eye toward supporting U.S. policy in this important

security area. Our regular direct contact with the Department of Defense through

the annual meetings of the Joint Committee on Military Affairs has been a highly

useful channel of communication. In addition, we regard the service of the Civic Action Teams as invaluable to our people at the community level and a constant reminder of our close relationships.

As you know, Mr. Chairman, the Compact as a whole has no termination date,

and was envisioned to create a long-term relationship. However, Section 354 ofthe

Compact says that the defense provisions are ‘‘binding . . . for fifteen years . . . and

thereafter as mutually agreed. . . .’’ This provides the opportunity during our renegotiations for any needed readjustment. For its part, the FSM remains satisfied with

and committed to Title Three and to that end would like to remind the United

States of the availability of locations within the FSM for Defense activities such as

the propositioning of forward deployment supply ships (a matter that was reiterated

by President Nena with Assistant Secretary Kramer at the Department of Defense

during his Washington visit).

It is the FSM’s view that despite the end of the Cold War the uncertainties in

Asia necessitate a long-term U.S. security umbrella throughout the former Trusteeship area. It was the consensus view of the original Compact negotiators, and remains our view, that continued economic progress and stability within Micronesia

serves that security interest.

The fifteen years of economic support provided in the Compact was never envisioned to produce full self-sufficiency within that time period, and in fact, the Compact reflects an awareness that some level of continuing assistance will be needed.

While the FSM today still has a long way to go in terms of economic development,

we feel that from the standpoint of due diligence, the progress made in the relatively brief time so far, together with our currently building momentum, justifies

an appropriate level of continued economic assistance by the United States, beyond

the first fifteen years.

Mr. Chairman, about five years ago, we in the FSM, as well as our friends in the

United States and elsewhere, began to realize that the impressive improvements in

infrastructure made possible by Compact funding were not being accompanied by

the degree of economic growth we had hoped for. The long-term implications of this

situation were quite ominous, and something obviously had to be done. With the

help of the Asian Development Bank, the United States, Japan and other donors,
58

an FSM-wide economic self-analysis was commenced. National and State economic

summit meetings were held to clarify and redefine our economic goals. Then, three

years ago, the FSM began making serious and painful course-corrections to reform

its governmental structure, downsize its governmental workforce and energize its

private sector. The process, known as ‘‘structural adjustment,’’ is well-advanced, but

will be ongoing for some years to come. It includes efforts to improve efficiency and

to develop our own indigenous statistical and planning capabilities, including our

capability to evaluate and measure economic progress.

This is a two-pronged program that involves, on one hand, Government and Public Enterprise reforms, and on the other, Private Sector reforms. On the government

side, we are reorganizing and downsizing our institutions and improving our tax

structure, in order to move along the adjustment path to sustainable finances and

rational service levels. On the private sector side, our reforms are designed to improve the economic environment for private sector growth, especially in those productive activities that earn dollars from abroad. This means, among other things,

reducing the role of Government in productive activities, and restructuring our legal

and regulatory environment to encourage private sector activity and investment, especially foreign investment.

It is still somewhat early to project results, but we are encouraged by tangible

actions taken thus far that have been quite difficult, politically.

• We have restructured governments at the National and State levels.

• We have reduced the size of the Government workforce—in all we have so far

eliminated over 1,200 positions, or almost 20 percent.

• We have frozen wage increases and even reduced the salaries of most government employees by some 10-20 percent.

• All of our public utilities and many other former government activities have

been either commercialized or privatized.

• We have improved the structure of our tax system and have thus increased

the share of Government revenues raised from domestic sources.

One State-specific example is worth noting. Many of you will be aware that our

largest State—the State of Chuuk—faced a financial crisis of great magnitude starting in 1995. I will not burden you with the details of measures that have been

taken, but I am happy to report that the crisis has been overcome. The arrears that

Chuuk built up through domestic and offshore debts have been fully acknowledged

and partially repaid. Based on current and credible projections, Chuuk’s operating

deficit will become a growing surplus and creditor debts will be paid in full by June

of 1999.

Mr. Chairman, it is only natural that in approaching the question of the future

of our free association with the United States we must take stock of the Compact

experience during the first fifteen years. This includes the development of the world

security picture and its outlook, but it also includes the need to account for how the

Compact has worked from the standpoint of its developmental goals, and what

changes might need to be made in the Compact arrangements.

To that end, for over a year now, the FSM, on its own initiative, has mounted

a major undertaking to identify its reasonable and appropriate needs for ongoing

United States assistance after the first fifteen years, taking into account the structural adjustment, the outlook for other sources of assistance and its internal capacity for revenue generation. This undertaking is being conducted by a representative

body constituted by law, known as the Joint Committee on Compact Economic Negotiations, chaired by former FSM Vice President, Petrus Tun. The Committee is supported by a full-time Secretariat headed by myself as its Executive Director, with

the assistance of development economists, an attorney, and other expert consultants

as needed. We expect this endeavor to be completed prior to the opening of the renegotiations late next year.

Mr. Chairman, recalling my earlier remarks expressing appreciation for all that

the United States has done, I would like to close by saying that the FSM does not

approach the question of continued United States assistance as asking for ‘‘foreign

aid,’’ nor do we assert an entitlement, but rather, we respectfully suggest that such

assistance, should it be forthcoming, will continue to be a key aspect of a unique

and mutually beneficial partnership between our two nations—a Partnership in Development for Self-Reliance and Security.

I thank you once again for inviting us to appear today. We in the Federated

States of Micronesia look forward to continuing our dialogue with the United States

Government, including with the Congress of the United States, from this day forward.
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STATEMENT OF HON. PHILLIP MULLER, RMI MINISTER OF FOREIGN AFFAIRS AND

TRADE

Mr. Chairmen and Distinguished Members of the House Resources and International Affairs Committees:

It is an honor for me to appear before your Committees today on behalf of his

Excellency Imata Kabua, President of the Republic of the Marshall Islands (RMI).

Thank you for allowing me to share the perspective of the RMI Government at this

important and welcome oversight hearing. I see this hearing as an opportunity to

present and discuss challenges in the Compact before negotiations to extend certain

of its provisions commence next year.

For the purposes of today’s hearing, I will focus my remarks on three major

points. First, I will discuss the value the RMI places on our bilateral relationship.

Second, I will address some of the specific issues the U.S. Government has raised

concerning fiscal administration in the RMI. Finally, I will identify some of the difficulties the RMI is experiencing with the existing Compact.

The value the RMI places on the bilateral relationship:

Let me begin by expressing that the Government of the Republic of the Marshall

Islands remains fully committed to not merely preserving but to strengthening its

close friendship with the United States. Having moved successfully from colonial

status to full national sovereignty and self-government, the Republic of the Marshall

Islands stands, by choice, as a friend and ally of the United States. We share commitments to world security, democracy, and disarmament. We have a friendship

shaped by a shared history, and shared goals; a relationship characterized by transparency, and cooperation; a successful relationship which has allowed for the

decolonization of the Marshall Islands, and a special, close and continued relationship which extends indefinitely under the Compact of Free Association.

The Compact of Free Association and its subsidiary agreements embody the strategic alliance that evolved during the Trusteeship and continues in perpetuity in accordance with the Compact. These mutual security arrangements include the U.S.

Army Missile Range at Kwajalein Atoll which the Marshall Islands is proud to host.

As the site specifically named in the Anti-Ballistic Missile Treaty for the U.S. Government to test its missile defense systems, Kwajalein Atoll helps provide security

to the United States, the Marshall Islands, the Pacific region, and the world. On

several occasions, the RMI Government has accommodated Department of Defense

requests to utilize additional islands for its programs. We believe the present arrangement is in the best interest of both our nations, and contributes to our shared

commitments to world security. Furthermore, the Marshall Islands provides a permanent buffer zone between the United States and potential threats from Asia, and

extends U.S. military access to approximately l million square miles of the Pacific

Ocean where no other foreign military can enter.

The strategic nature of our partnership continues to be of tremendous mutual importance to our nations. I was extremely pleased to see these same sentiments reflected in the Joint Resolution introduced by the Chairmen of both committees holding this hearing, as well as our good friend, Congressman Faleomavaega. The Marshall Islands appreciates these expressions and hopes that the resolution will continue to move forward. I am also pleased to inform the Committees that the Nitijela

passed its own resolution on February 5, 1998, conveying the RMI Government’s

commitment to its bilateral relationship with the United States. The text of the

Nitijela resolution, which recognizes the importance of continued friendly relations

and the maintenance of long-term military alliance and strategic partnership, is attached as a supplement to my statement.

In recognition of the strategic partnership between the RMI and the United

States, the Mutual Security Agreement signed by our governments reflects the understanding that economic assistance to the Marshall Islands is not foreign aid, but

an integral aspect of creating the stability necessary to augment our mutual defense

goals, provided in exchange for important strategic denial and defense rights that

the U.S. enjoys in the Marshall Islands. The words ‘‘mutual’’ and ‘‘security’’ are

meant to reflect how each of our countries benefit from our relationship; the United

States secured its defense interests and the Marshall Islands secured its economic

and social interests, thereby creating a mutually beneficial alliance based on four

decades of Trusteeship. Relations between military and economic security is a recognition of the conditions required to promote international peace and prosperity.

This principle is expressly stated in the Mutual Security Agreement:

‘‘The Government of the United States and the Government of the Marshall Islands recognize that sustained economic advancement is a necessary contributing element to the mutual security goals expressed in this agreement.’’

(Agree-
60

ment Between the Government of the United States and the Republic of the

Marshall Islands Regarding Mutual Security Concluded Pursuant to Section

321 and 323 of the Compact of Free Association.)

In this respect, I would like to extend my sincere gratitude to the Members and

Administration representatives who argued that the Pell Grant, an economic and social program consistent with the strategic nature of our friendship, is an integral

component of the overall U.S. interest in the Marshall Islands. Our youth who are

pursuing their higher education, as well as Marshallese serving in all branches of

the U.S. armed forces, will enhance the economic and strategic goals embodied in

the Compact. No country receiving conventional foreign aid has a relationship with

the U.S. including the special legal, military, political, economic and social mutual

undertakings that exist between our governments by treaty and law. That is why

the RMI is not a foreign assistance recipient.

We look forward to continuing to strengthen our friendship, and therefore, are

confident that the upcoming negotiation with the U.S. of certain elements of the

Compact will provide a constructive process to reflect our shared commitment to the

relationship. We are likewise confident that in due course the U.S. will select a person of integrity to lead the U.S. team. This will give us confidence that both sides

are committed to ensuring that our relationship continues to work in the best interest of both our nations.

U.S. Government concerns about fiscal management in the RMI:

We understand that some people in the U.S. Government have concerns about fiscal management in the RMI. We acknowledge that there have been a number of

problems with our financial management and budget execution. I would like to put

some of our financial faltering into perspective, however.

During the Trusteeship, the Marshall Islands was deemed a secure area by the

U.S. Administrators. Until 1968, outsiders could not visit the Marshall Islands without first obtaining permission from the U.S. Navy. Until 1973, no foreign investment

of any sort was allowed in the Marshall Islands. The public works department was

established to create government jobs for Marshallese people as a means to distribute U.S. money. Most of the Compact money we now receive goes to pay debts

from loans that were necessary to upgrade the dilapidated infrastructure we inherited from the Trust Territory Government. I raise these points only to note that although we have made mistakes—some of our investments were admittedly overambitious, some were questionable, and still others were sound—we have made a

bona fide effort to develop our economy. In 12 years time, however, we cannot

achieve the economic development that U.S. strategic interests intentionally thwarted for decades during the Trusteeship.

In retrospect, we acknowledge that monies were not used as effectively and efficiently as they could have been. For the most part, our infrastructure has been

built, but the costs have been higher than they should have been. Unfortunately,

we did not effectively enforce financial reporting from individuals and companies

who expended funds. In the case of the Ebeye Hospital, we have made arrangements with the ADB to help recoup funding to complete the project sponsored by

the U.S. Government. ADB has responded positively to our request for assistance.

I think it will be in both our nations’ best interest to build accountability mechanisms into the next phase of Compact assistance.

Despite our growing pains, the RMI Government is committed to meet the challenges necessary in order to install rigid systems of financial management and to

operate within our financial means. We are undertaking democratic institutions

building to improve deficiencies in the financial system that we inherited.

Concern has also been expressed about the over-enrollment of the 177 Health

Care Program. We made the mistake of not requiring eligibility criteria for enrollment in the program. As a result, everyone with land claims to those atolls, and

not just those requiring medical attention as a result of the testing program, enrolled in the program. This is a mistake that my government acknowledges. In response, my Ministry has drafted eligibility criteria for the Cabinet to consider. We

are working with the 4 atoll leadership to help them understand the absolute necessity of getting enrollment in this program under control and in accordance with the

original intent of the Compact. I expect the eligibility criteria to be established in

the near future.

I would also like to point out that the RMI Constitution provides for an independent Auditor General to audit all public accounts. The Auditor General’s Office

has hired an internationally recognized auditor, Deloitte & Touche, to conduct annual audits in the RMI. The very fact that we know what our budget management

problems are demonstrates that the audits ensure accountability. Over the years,

the Auditor General’s Office has been introducing progressively more of the sophisti-
61

cated financial systems necessary to properly manage accounts. Please keep in mind

that the RMI inherited a financial management system from the Trust Territory

that consisted primarily of pencils and papers. We are doing our best, however, to

create first-class financial management systems in the Marshall Islands.

In recognition of the fiscal management problems we have had, the RMI Government has committed itself to a vigorous reform program. I would like to briefly describe some of our fiscal reform measures. Many of these reforms have been painful

both in political and practical terms as they affect the lives of all Marshallese people: The RMI Government worked closely with the Asian Development Bank (ADB)

to develop a Public Sector Reform Program (PSRP). With a $12 million loan from

the ADB, the Reform Program is downsizing our public sector which became overinflated during the Trusteeship. We have determined, however, that we will not

allow our downsizing efforts to compromise the RMI’s Constitutional mandate to

provide essential health care and education services to the population; We have

launched a Private Sector Investment Program (PSIP) that aims to develop strategies in each of the sectors which make best use of the country’s resources within

the overall fiscal and budgetary constraints; A Private Sector Unit has been established to formulate and implement a strategy and a program for the privatization

of state-owned enterprises and service departments. The Private Sector Unit is also

tasked to create a competition and regulatory policy framework to ensure that the

eventual privatization of those state-owned enterprises having monopolies in their

sectors, such as the national airline and the public utilities, do not unfairly infringe

on the public good; Our Foreign Investment Advisory Service (FIAS) has prepared

draft legislation for the Government to consider ways to promote a comprehensive

investment program; An Office of the Economic Policy Advisory Services & Statistics

provides the budget framework based on macroeconomic factors facing the country

which can be addressed through fiscal policy; and the RMI has adopted a set of principles that requires that the recurrent and capital budgets are closely integrated

and visibly linked to national and sector development goals and objectives.

I would also like to point out that the RMI Government has reduced government

expenditure from over $105 million in fiscal year 1995 to a projected $75 million

in fiscal year 1999. The reduction in expenditure has been achieved by a curtailment of capital spending, by a 27 percent decline in established civil service posts,

by a reduction in government subsidies (especially by the national air carrier), by

a lowering of wages of elected of finials and civil servants in both real and monetary

terms, and cuts in the operating costs of line ministries (including the elimination

of 4 ministries). At the same time, we are providing training to the individuals

whose public jobs have been terminated so they can become productive members of

the private sector.

Difficulties in the existing Compact:

Like the U.S., we also have concerns with the existing Compact which we would

like to bring to your attention. These problems exist primarily with the economic

development incentives and Section 177 of the Compact. Because of the complex nature of the Compact, it is often difficult to interpret its intent. When attempts are

made to deny special rights or privileges specified in the Compact we often face

problems in our implementation of the Compact’s provisions. Problems have

emerged when essential provisions in the Compact, such as the immigration and

labor rights, are constrained and compromised by misinterpretations of the Compact’s intent. Our relationship cannot be categorized like other countries when it is

unique.

With regard to the aspects of the Compact intended to stimulate economic development in the Marshall Islands, there are certain provisions in the Compact that

were never implemented. For example, we would have liked to take advantage of

the National Health Service Corps in Section 105(k) or the technical assistance envisioned in 105(1). For the programs available on a reimbursable basis, we do not

have the cash flow assumed to pay for the services up front.

The RMI Government also demonstrated that it lost key economic benefits under

Section 111(d) of the Compact. The RMI lost these benefits when the U.S. made unilateral changes to the Compact that the Marshallese electorate decidedly approved.

We thank Congress for recognizing the economic loss as a result of the U.S. removal

of the economic incentives. Yet, we have only received 1/10th of the amount for

which we established a U.S. commitment under Section 111(d). We ask that you revisit the loss of economic benefits with us, Mr. Chairmen.

We are also concerned about the limited nature of the Essential Air Services

Agreement in the Compact. On September 30th of this year, the Essential Air Services provision of the Compact will expire. This provision, which ensures that U.S.

air carriers provide flights adequate to promote economic development, is vital to
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every aspect of our efforts to promote economic development. It is my hope that the

Administration and Congress will work with us on this matter and that your Committees, Mr. Chairmen, can support the Essential Air Service provision that is a

vital component of the path to economic self-sufficiency that both of our nations envision for the Marshall Islands.

The other major area of RMI concern about the Compact is Section 177, the section which defines U.S. responsibility for and efforts to address the consequences of

the nuclear testing program. Like people throughout the world, the Marshallese

found great relief and assurance in the end of the Cold War. We, in the Marshall

Islands, like the United States, played an important role in helping the United

States actualize its national, and global defense goals and in protecting the world

from the threats of nuclear war.

Although we share in the relief that the Cold War has ended, our countries together bore a disproportionate amount of the burden and suffering in reaching this

goal. People in the Marshall Islands continue to die and suffer from the debilitating

health effects of radiation exposure. The expense and breadth of radiation illnesses

experienced in the Marshall Islands has overburdened our health care system and

depleted scare economic resources. As you will see from the attached statement of

the Chairman of the Nuclear Claims Tribunal, Oscar deBrum, the funding for the

Nuclear Claims Tribunal is inadequate to cover even the personal injury claims

brought before the Tribunal. It troubles me to report that the Tribunal’s Chairman

has had to make emergency allocations of just a few hundred dollars to radiation

victims dying in the hospital and the families of the awardees to provide a contribution to the costs of death ceremonies.

The Tribunal has not awarded a single environmental claim despite the fact that

the Compact intended for the Tribunal to distribute both personal injury and land

damage claims. Although the Tribunal has not yet adjudicated the land damage

claims, it is clear from evidence presented that loss of use for the affected atolls and

the cost of remediation to restore the atolls to U.S. cleanup standards is substantial.

As for the 177 Health Care Program, there is no inflation adjustment although

inflation adjustments exist for almost every program in the Compact. Because of rising health care costs and inflation, even if we substantially reduce our eligibility,

which I promise we will do, the 1998 value of the $2 million amount envisioned during Compact renegotiations amounts to approximately $90O,000 a year. This is

grossly inadequate to provide for the expensive care of this uniquely exposed population needs. The program is further hampered by the great expense of transporting

and housing tertiary patients off-island due to a lack of medical facilities and

trained personnel in the islands. It is also expensive to maintain health care facilities at multiple, scattered locations. Furthermore, we are forced to employ outsiders

to assist with health care delivery as 42 years after the end of the testing period

there still is not a single Marshallese trained in radiation science or radiation medicine.

While we are proud of our strategic partnership with the United States, it saddens us that Marshallese citizens who suffer from radiological illnesses are not compensated in one, full payment the way U.S. radiation victims are. Because I was

one of the RMI’s Compact negotiators, I know we were led to believe that awardees

would receive a one-time payment for their radiological illnesses and that market

earnings would lead to annual increases of the fund of 15 to 18 percent. Furthermore, we were told that the interest from the fund alone would be adequate to make

our awards and that the fund would remain untouched so it could serve as an

intergenerational fund to provide long-term financial stability. None of these assumptions have proven to be true. This inequity of the awards process leads to great

suffering and discomfort in the Marshall Islands.

As you are aware, the Marshall Islands agreed to put to one side the nuclear-related claims it presented to U.S. Federal courts while we determine the effectiveness

and adequacy of the programs and allocations in Section 177 addressing the adverse

consequences of the testing program. In our 12th year of the Compact and Section

177 claims, it disturbs me to report to you, Mr. Chairmen, that Section 177 of the

Compact is inadequate to the point of becoming dysfunctional. While the U.S. Federal courts accepted our decision to put these claims before the RMI Nuclear Claims

Tribunal, that decision was based on the presumption of adequacy of the remedy.

That presumption is now being seriously undermined, and called into question.

In addition to the inadequacy of funds for the Nuclear Claims Tribunal, the Compact fails to provide adequate health services to populations affected by radiation

and it fails to recognize the full scope of radiation injury. The United States conducted 67 atomic and thermonuclear tests in the air, on the land, and in the seas

surrounding our islands. Seventeen of these tests were in the megaton range far exceeding the size of the bomb the U.S. dropped on Hiroshima. Yet, the Compact defi-
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nition of exposure, which determines which populations are eligible for medical care,

is based on exposure to just 1 of the 67 tests conducted, the ‘‘Bravo’’ test. What

about the radiation effects of the other 66 tests? What about the cumulative radiation effects of all 67 tests? As a result of this extremely narrow definition of radiation exposure, only 174 people in the nation are legally eligible in Section 103(h)(1)

to participate in a U.S. provided radiological health care program. Furthermore,

only 4 atolls covering 22,500 square miles, including the two ground zero test sites,

are legally defined as affected by radiation. In comparison, I find it interesting that

the United States considers the Nevada land area affected by radiation to extend

over 3 million square miles despite the fact that the total tonnage detonated in the

Marshall Islands was almost 100 times greater than the total yield of weapons tested in Nevada.

Fortunately, there is a provision in Section 177 of the Compact, the changed circumstances provision, that allows Congress to work within the purview of the existing bilateral framework to address shortcomings of the U.S. programs designed to

address the problems resulting from radiation exposure. We believe that it is in the

best interest of both our nations to deal with problems in the existing Compact

framework. This issue cannot wait for renegotiation of the second Compact. People

are dying now. People are suffering now. Medical expenses are beyond our means.

We lack the medical care and the money to finance their awards.

Thanks in great part to the Committee on Resources’ efforts to see that Department of Energy documents relating to the U.S. Nuclear Weapons Testing Program

in the Marshall Islands were declassified and released to the RMI, we now know

that the extent of damage caused by the nuclear testing is much greater and much

broader than either the U.S. or Marshallese negotiators of the Compact understood

at the time. Based on this new information, we are compelled to act, and the Compact provides the framework for taking action. I would like to ask you, Mr. Chairmen, to convene hearings on the changed circumstances after you receive our petition. Changed circumstances hearings would provide us an opportunity to present

our findings to you, and hopefully, to lay out a pathway for providing medical care

and assistance to all of those people who have truly suffered as a result of our

shared strategic interests.

I would like to ask your support, Mr. Chairmen, in securing an immediate ex

gratia payment for the victims dying of radiation-related illnesses for which there

are no means to pay for. The Compact allows for ex gratia payments under Section

1O5(c)(2). We request your assistance in convincing the Appropriations Committee

of the importance of this allocation which the Compact provides for.

STATEMENT OF HIS EXCELLENCY HERSEY KYOTA, AMBASSADOR EXTRAORDINARY AND

PLENIPOTENTIARY, PALAU AMBASSADOR TO THE UNITED STATES OF AMERICA

Mr. Chairman and distinguished members of the Committee on Resources and the

Committee on International Relations Subcommittee on Asia and the Pacific, it is

indeed an honor and privilege for me to testify, on behalf of President Nakamura

and the government of the Republic of Palau, before this joint committee. Thank

you, Mr. Chairman for the opportunity.

As manner of introduction and background information, allow me Mr. Chairman

to briefly explain for the record the relationship and camaraderie that first began

during World War II between Palau and the United States. I believe that such camaraderie between our people encouraged and paved the way in the establishment

of our countries current relationship. Because of its location, Palau quickly became

one of the most important areas in the Pacific for strategic purposes during and

after the war, for that matter. As a result, some of the fiercest battles in the Pacific

during the war took place in our islands. Thousands of Americans, Japanese and

native Palauans lost their lives in those battlefields. Palau, undoubtedly played a

major role in the U.S. victory in the Pacific during World War II. Immediately after

the war, the United States established its administration under the Department of

the Navy. In 1946, the United Nations formally placed Palau and the rest of the

Micronesia Islands under the U.N. Trusteeship Council directly under the administering authority of the United States. Palau and the rest of the islands of Micronesia became known as the Trust Territory of the Pacific Islands. For many years

preceding independence, Palau was administered by the Department of the Interior.

During that time, the Government of the United States established self government,

provided Palauan people with education and health care programs, and nurtured

democratic institutions, which guarantee human rights, protect freedom of speech,

and preserve the rule of law in Palau. Although independent, Palau will always remain a member of the American family by virtue of its long friendly tie and its
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present special relationship under the Compact of Free Association between our two

countries.

Before I continue, Mr. Chairman, I believe it is worth noting that today, October

1, 1998 is the fourth anniversary of the Republic of Palau’s independence in free

association with the United States of America. As you know, the original Compact

legislation for the three Freely Associated State governments was passed by the

U.S. Congress in 1986. On behalf of the people of Palau, I would like to gratefully

acknowledge former President Ronald Reagan, whose beliefs in freedom for all mankind and whose vision of sovereignty for islands of the Pacific Trust Territory led

him to sign the compact legislation into law, thus setting the stage for Palau’s independence. We are also grateful to President William Jefferson Clinton for signing

into law an enabling legislation passed by the Congress in 1994 putting into force

the specific Compact of Free Association between Palau and the United States,

which came into effect on October 1, 1994. October First is now our Independence

Day and a national holiday in Palau. As we begin our fifth year of independence

under the Compact agreement, Palauans everywhere proudly celebrate this day and

the special relationship that exists between our two nations. The feeling of respect

and admiration on the part of the Palauan people toward this great nation and its

people for giving us our independence will continue throughout the term of this special relationship and beyond.

This special relationship, as embodied in the Compact of Free Association, extends

to Palau the privilege of military and defense protection of the most powerful nation

in the free world. As a mutual partner and member of the American family, Palauan

citizens may voluntarily serve in the Armed Forces of the United States. The Republic of Palau receives the benefit of a variety of Federal grants and program assistance, particularly in the fields of education and health care. Our citizens also enjoy

the freedom of migration and unrestricted access to the United States and its territories. At the same time, Palau enjoys complete independence and sovereignty.

These benefits and freedom given to Palau are not entirely free. Under the Compact,

as you know, the United States provides these benefits and economic assistance in

exchange for military land use rights.

Mr. Chairman and members of this joint committee, while minor disputes and

questions exist with regards to interpretations of certain terms and provisions of the

compact, I am happy to report that the relationship that exists between our governments is functioning effectively and efficiently. These disputes should not, in anyway, interfere or affect the normal government to government relations between our

two republics. In fact disputes and minor disagreements are regarded as a normal

aspect of a healthy, working relationship. As long as lines of communication and

continuing dialogue remain open and sincere, I am confident that all issues can be

resolved pursuant to the provisions of the Compact, and, indeed, this oversight hearing serves as an important step in this process.

Mr. Chairman, during this fiscal year which begins today, our government will

lose approximately six million dollars in U.S. Federal programs and grant assistance, due to the compact five-year phase out schedule requirement. In addition, the

compact operation fund that Palau receives annually for the first fifteen years is

drastically reduced from twelve million dollars to seven million dollars, a five million dollars reduction. This loss of Federal programs and reduction in operation

fund, totaling eleven million dollars, translates to loss of many jobs and valuable

services to our people. While the effect of these reductions was anticipated, the reality as to how much they would affect our budget was not fully comprehended until

the Olbiil Era Kelulau (Palau National Congress) began its 1999 fiscal year appropriation process this past summer. Mr. Chairman, eleven million dollars may represent a tiny fraction of the U.S. budget, but in Palau, it represents over twenty

percent (20%) of our total annual budget. This will not only hinder our ability to

deliver essential services to our people, but more importantly, it will also affect our

economy.

U.S. Federal grants and program assistance had helped many Palauans of all

ages. These Federal grants and programs have been the backbone behind the success of our education, health care and social institutions. Although, some of these

Federal grants and program assistance have been terminated or phased out pursuant to the terms of the Compact, other Compact provisions stipulate that Palau may

request for continuation of various grants and program assistance and the United

States may consider the request. I ask this Committee to consider this, as our request for your representatives and ours to revisit those sections of the compact dealing with Federal grants and program assistance in order to discuss and assess the

need for continuation.

Mr. Chairman, one of the most important Federal grants that has truly helped

many Palauan citizens is the Pell Grant. Without this grant, hundreds and hun-
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dreds of Palauan students graduating from high schools would not have been able

to attend colleges and universities in the United States, regardless of their academic

standing. I understand that the House and the Senate conferees were able to agree

on compromised language on H.R. 6 to extend the termination of freely associated

states students Pell Grant eligibility from the year 2001 to 2004. I want to take this

opportunity, Mr. Chairman, to extend my appreciation and gratitude to your colleagues in the House of Representatives and the Senate who expressed strong support for our students’ eligibility, and to especially thank you for your direct and persistent involvement in addressing our request.

Allow me, then, Mr. Chairman to point out one minor fact that may have been

overlooked during your specific deliberation on the FAS Pell Grant eligibility provision in H.R. 6. While it is certainly the prerogative of the Congress to legislate on

any issue it sees fair and appropriate, I feel that Palauan students are being short

changed by terminating Pell Grant eligibility for all three freely associated states

at the same time. Palau, as I mentioned at the outset, is celebrating its fourth anniversary today. We are ten years away from 2009, the year in which our compact

economic assistance terminates. The Compacts for the Federated States of Micronesia and the Republic of the Marshall Islands, however will terminate in the year

2001, giving their students full eligibility during and possibly beyond the terms of

their first fifteen years of their Compacts. As a matter of policy, I strongly believe

that the Congress should be consistent and fair in its treatment to the freely associated states. Mr. Chairman, to end or sunset the Pell Grant eligibility for all three

FAS in the year 2004 would not be fair for Palauan students. Palauan students

should remain eligible for Pell Grant assistance until the termination of our compact

economic assistance in year 2009 and three years thereafter to be equitably fair.

After all, section 124 of Palau’s compact stipulates that the United States will extend similar benefits and treatment extended to FSM and RMI to Palau. While this

may have been simply an oversight, Mr. Chairman, I respectfully request your Committee to look into this matter in a fair and equitable manner.

As an island nation, Palau is surrounded by a vast ocean. Our exclusive economic

zone extends to two hundred miles from our shores and traditional baselines. With

limited technology and government resources, it is extremely difficult to patrol our

waters; as a result, a variety of ocean resources, particularly tuna stock and other

highly migratory species, are harvested in our waters by poachers often using illegal

fishing methods. We certainly need assistance in this area. Without consented efforts and mutual cooperation among the freely associated states and other Pacific

islands and, certainly the assistance of the United States, we will not realize the

full economic benefit of our ocean resources. In this connection, I request this Committee and the Congress to assist us in this endeavor.

Palauan culture is greatly influenced by the ever-present interaction between our

people and the surrounding sea. As you know, Palau’s Coral Reefs are blessed with

perhaps the richest diversity of marine life in the entire world. And now, as a newly

independent nations seeking long-term economic stability, we look to our coral reefs

as the resources which can attract and sustain our emerging tourism industry. The

establishment of the Palau International Coral Reef Center could provide immeasurable support for our efforts to rehabilitate, maintain and conserve Palau fragile

reef system and serve as an ideal research base for the preservation of other reef

systems the world over. This project is a tri-partite undertaking by the United

States, Japan and Palau which was advanced within the framework of the JapanU.S. common agenda. Both Japan and the United States have been focusing on the

preservation of coral reefs since 1994 as part of their cooperation for addressing

global environmental problems. Through a services of tri-partite discussions, we

have developed a Basic Design Study in which the Republic of Palau has agreed to

make available land for the site and to clear it in preparation for construction. Recalling the many years of Compact negotiations with respect to land issues, I know

you can appreciate the significance of Palau gesture to provide this land at no cost

to the Center. Under the proposed plan, the Government of Japan will begin construction of the Center during the first half of next year. As for the United States

role in supporting the Center, we have yet to see any significant commitment of

funding to ensure the successful startup of the Center operations. In discussions on

technical cooperation held in April of this year, U.S. delegation members pointed to

the Federal Funds and programs committed to the Republic of Palau during the fifteen year life-span of the Compact of Free Association. I wish to make one point

very clear. The Palau international Coral Reef Research and Conservation Center

was not part of Compact negotiations and, as a project arising from the bilateral

cooperation between Japan and the U.S. under the Common Agenda, should not be

funded with existing Compact funds. Reasonably, additional funds should be made

available for this project whether under the Compact or otherwise.
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Mr. Chairman, I would like to commend you for your strong support for House

Congressional Resolution 131 which encourages the Administration to identify opportunities to take substantive actions to advance the exploration of the ocean and

the appropriate use of ocean resources and for your endorsement of the Coral Reef

Conservation Act. Palau also views that June 11, 1998, Executive Order on Coral

Reef Protection as a further indications of the U.S. Government’s commitment to

international cooperation on the protection of coral reef species and the implementation of appropriate strategies and actions to promote conservation and sustainable

use of coral reef resources worldwide.

Our record of discussion of June 7, 1996 on Palau Coral Reef Project, signed by

then Charge ́ d’affaires, Mr. Richard Watkins, indicates that the United States considers the proposed Center to be thought of as an integral part of the larger International Coral Reef Initiative. The recent Executive Order specifically calls for expanded collaboration with other International Coral Reef Initiative Partners to implement through its framework for Action. We would like to suggest that technical

cooperation in the form of startup support for the initial five years of operation of

the Palau International Coral Reef Center would be the one most significant gesture

that the United States could make in the area of global coral reef protection. Whether under the Coral Reef Conservation Act or through existing Federal programs

under the Department of State, Department of Interior, Department of Commerce,

and the Agency for International Development, we urge the United States to seek

available means for supporting the Palau International Coral Reef Center Project

as a truly tri-partite endeavor. In this regard, Palau stands ready to assist in advancing the ideas of the Japan-United States common agenda.

The largest single and certainly the most important project ever to be built in

Palau, in terms of funding, magnitude, development and economic value, is the

Babeldaob Compact Road. This project, as you know, is financed by the Government

of the United States as part of the economic assistance package under the Compact

of Free Association between Palau and the United States. The U.S. Army Corps of

Engineers is charged with the responsibility to manage and oversee the construction

of the road project, on behalf of the United States Government. The Palau Presidential Task Force on Babeldaob Road and the U.S. Army Corps of Engineers, have

had many meetings in the last three years to discuss essentially all aspects of the

road project. As a result, most of the preliminary work relating to plans and designs, surveys, land easements, environmental assessment study and environmental

impact statement are completed. The actual ground breaking for the project is

scheduled to commence at the end of this year or very early next year.

Palau Government had planned to play an active role during the actual construction of the project, as announced by President Nakamura on several occasions during the initial discussions of the project. To demonstrate his seriousness and desire

to be part of the ‘‘team’’ and to really engage in all aspects of the road project, President Nakamura created a task force, which was responsible to oversee all aspects

of the project, including minimizing impact and damage to the environment. The

plan was for the Government of Palau to unilaterally fund the task force with sufficient budget to hire and employ professionals in the fields of engineering, environment and others to assist the task force in their task. Due to the unexpected collapse of the Koror-Babeldaob Bridge in the late 1995, much of Palau’s financial resources were directed to the bridge relief effort, leaving virtually no funding for this

much desired professional team of experts to oversee the construction of the

Babeldaob Road Project. Having no other options, the President submitted an application to the Department of the Interior requesting for technical assistance, in the

form of grants, to fund the professional U.S. under the Common Agenda, should not

be funded with existing to oversee all aspects of the road project and report to the

Government of Palau. This team will represent the Government of Palau to ensure

(1) that contractors meet design specifications and work quality standards; (2) that

the environmental impact statement and requirements are complied with to minimize damages to the environment; and (3) that the interests of the Government of

Palau are addressed and considered. Palau’s request for technical assistance from

the Department of the Interior amounts to $525,000.00. I believe this is a reasonable request and, with the blessings of this Committee, I would like to ask the Department of the Interior to approve our application in an expeditious manner.

Needless to say, Mr. Chairman the completion of this important project will play

a major role in shaping our development, economic opportunity and self sufficiency

and prosperity to our young nation. The island of Babeldaob, often referred to as

the ‘‘Big island,’’ has great potential for development in the areas of agriculture,

poultry, aquaculture, cattle ranches and tourism among others.

The last thing I wish to report to you today, but certainly not of least importance,

is the status of our Compact Trust Fund. As you may recall, in 1994 and 1995 Palau
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received the sum of sixty six million dollars and four million dollars, respectively

as trust fund. These funds are part of our economic package under the Compact of

Free Association with the United States. Under the terms of the compact, investment of these funds is restricted to U.S. securities and financial instruments and

should be invested for at least five years before the Government of Palau can withdraw any interest from the principle investment. Mr. Chairman and members of the

Committee, I am happy to report to you that the investment of our trust fund is

doing exeptionally well. In just five years time, our investment has grown to a sizable sum. We have been very fortunate in the sense that our investment firms and

money managers have not suffered any major financial setbacks, thanks to healthy

economic conditions of the United States. Our Government can now withdraw funds

from the investment to supplement our budget shortfall, however, we are mindful

of the fact that Palau, unlike FSM and RMI, is not eligible for FEMA and other

Federal relief programs, thus the leadership is reluctant to exercise that option. Unless it is absolutely essential, particularly in time of major disaster or emergency,

the general feeling among the leaders in Palau is to leave the fund untouched for

another five years.

Mr. Chairman, these matters and issues I bring to your attention today are certainly within your grasp to address, consider and resolve expeditiously and fairly.

While minor disputes and differences exist, I am confident that this Congress and

this Administration, like Palau, will focus on positive accomplishments that we have

achieved in just four short years of our special relationship. The Government of

Palau realizes the importance of maintaining open dialogue and lines of communication on a regular basis, and welcomes oversight hearings such as this one, and Congressional or inter agency meetings in the future. Again, Mr. Chairman, on behalf

of Palau President Kuniwo Nakamura and the people of Palau, I thank you for this

opportunity to appear and testify before you and your distinguished colleagues.
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