Located just north of the equator in the Pacific Ocean are the two island nations of the FSM and the RMI. The FSM is a grouping of 607 small islands in the western Pacific that lie about 2,500 miles southwest of Hawaii (see fig. 1). The FSM has a total land area of about 270 square miles and is comprised of four states—Chuuk, Pohnpei, Yap, and Kosrae—with an estimated total 2000 population of 107,000, according to FSM officials. The RMI is made up of more than 1,200 islands, islets, and atolls, with a total land area of about 70 square miles. The Marshall Islands are located in the central Pacific about equidistant from Hawaii, Australia, and Japan. The Marshall Islands had a 1999 total population of 50,840, according to the RMI census. During the Second World War, the United States engaged in a Pacific campaign that liberated the islands of Micronesia from Japanese control. To administer these islands, the United Nations created the Trust Territory of the Pacific Islands in 1947. The United States entered into the trusteeship with the U.N. Security Council and became the administering authority of the four current states of the FSM, as well as the Marshall Islands, Palau, and the Northern Mariana Islands. The U.N. trusteeship agreement made the United States financially and administratively responsible for the region. In addition, the agreement, which designated this Trust Territory as a strategic trusteeship, granted the United States the ability to establish military bases, station armed forces, and close off any area of the Trust Territory for security reasons. During Senate consideration of this agreement, Secretary of State George C. Marshall, General Dwight D. Eisenhower, and Admiral Chester A. Nimitz, among others, remarked that the agreement gave the United States the complete and exclusive military control over the islands that was necessary to deny other militaries access to the islands and prevent their use as a springboard for aggression against the United States. In 1986, the United States entered into the Compact of Free Association with the FSM and the RMI. Through this Compact, the two Pacific Island nations became Freely Associated States and were no longer subject to U.S. administration under the U.N. Trust Territory of the Pacific Islands. The Compact, which consists of separate international agreements with each country, was intended to achieve three principal goals: (1) secure self- government for each country; (2) assist the FSM and the RMI in their efforts to advance economic development and self-sufficiency; and (3) ensure certain national security rights for the FSM, the RMI, and the United States. The defense and security relationships between the United States and the FSM and the RMI are governed by Title Three of the Compact of Free Association and three Compact-related agreements—the Status of Forces Agreement, the Military Use and Operating Rights Agreement, and the Mutual Security Agreement. The provisions of Title Three expire in 2001, but they can remain in effect during a 2-year negotiating window that ends in 2003. If Title Three is not renewed by 2003, the Mutual Security Agreement enters into force and preserves key aspects of the defense and security relationship between these countries. There are four primary U.S. defense rights and responsibilities contained in Title Three of the Compact and the Military Use and Operating Rights Agreement between the United States and the RMI (see app. II for a listing of other defense provisions contained in Title Three of the Compact that are due to expire in 2001): Title Three obligates the United States to defend the FSM and the RMI against an attack or the threat of attack in the same way it would defend itself and its own citizens. According to officials at DOD, this defense guarantee is stronger than the U.S. commitment to defend its North Atlantic Treaty Organization (NATO) allies from outside aggression. If no agreement is reached with the FSM and the RMI on extending Title Three’s defense provisions, the United States retains a lesser, albeit significant, obligation to defend the islands through its mutual security agreements with each country. Title Three provides the United States with the right of “strategic denial,” the ability to prevent access to the islands and their territorial waters by the military personnel of other countries or the use of the islands for military purposes. This right does not expire with Title Three, because the mutual security agreements between the United States and the FSM and the RMI contain this right. Title Three also grants the United States a “defense veto” over actions by the governments of the FSM or the RMI that the United States determines are incompatible with its authority and responsibility for security and defense matters in these countries. Unlike the U.S. obligation to defend the islands and the right of strategic denial, the U.S. defense veto will expire in 2001 unless Title Three of the Compact is extended (or 2003 if negotiations are ongoing for an additional 2 years). Finally, through the Military Use and Operating Rights Agreement with the RMI, the United States secured continued access to military facilities on Kwajalein Atoll. At the time the Compact was negotiated (1969-1986), the United States was concerned about the use of the FSM and the RMI as springboards for aggression against the United States, as they were in World War II, and the Cold War incarnation of this threat—the Soviet Union. Australia, New Zealand, and the United States practiced a coordinated Pacific-wide policy of strategic denial. This policy was successful in preventing the Soviet Union from establishing a diplomatic mission in the Pacific islands until 1990, when it did so in Papua New Guinea, and limited Soviet efforts to establish economic ties and enter into commercial fishing agreements. The United States and its allies blocked these diplomatic and economic efforts by the Soviet Union out of concern that closer relations with Pacific island governments could eventually lead to Soviet political involvement in and military access to the region. However, since the Cold War ended, the security environment in the Asia Pacific region has changed. The coordinated Pacific-wide policy of strategic denial ended with the dissolution of the Soviet Union; and the United States does not exhibit the same degree of concern about the influence of other foreign governments in the Pacific islands today. For example, China has seven embassies in Pacific Island countries, conducted $168 million worth of bilateral trade with the South Pacific in 1999, reportedly provided millions of dollars in economic assistance, and built a civilian space launch tracking facility in Kiribati—an island nation southeast of the FSM and the RMI. Taiwan also has a presence in some Pacific Island nations through diplomatic and economic ties and annual port visits by navy cadets. However, while China and Taiwan may have made greater diplomatic and economic inroads into the Pacific than the Soviet Union did, they lack the military power projection capabilities that defined the Soviet threat. The former Soviet Union was considered an expansionist superpower with a large “blue water,” or ocean-going, navy that was oriented toward the Pacific and capable of threatening the United States and its allies. In contrast, China, for instance, is currently considered to be a regional military power without a developed blue water naval capability or power projection capabilities that extend out far beyond its coastal waters. While the United States has maintained facilities on Kwajalein Atoll for military use, it has not exercised its other primary defense rights nor has it been required to fulfill its responsibilities contained in the Compact: (1) it has not had to defend the FSM and the RMI from an attack or the threat of an attack; (2) it has not invoked its right to deny access to the islands by foreign militaries or for military purposes; and (3) it has never had to veto an action by either the FSM or the RMI because the action was incompatible with the U.S. responsibility and authority for defense and security matters. As a result, these provisions remain untested. The United States has made extensive use of its access rights on Kwajalein Atoll in the RMI, which it secured through the Military Use and Operating Rights Agreement with that country (see fig. 2). The United States regularly conducts intercontinental ballistic missile (ICBM) tests, missile defense tests, and space tracking operations from facilities on the atoll that are under the authority of the U.S. Army (see fig. 3). Several ICBM tests are held annually. Regarding missile defense testing activity, a seventh national missile defense test was held in December 2001. Finally, equipment on the atoll is used for space-related activities such as observing space objects and tracking foreign launches (see app. III for more detailed information on U.S. operations and facilities on Kwajalein Atoll). According to DOD officials, the United States has never had to defend the FSM or the RMI. DOD and Department of State officials have also stated that the United States has never invoked its right of strategic denial or utilized its defense veto. However, a May 2001 port visit by three Taiwanese naval vessels in the RMI almost provided a test of these two provisions. In January 2001, the government of the RMI sought approval from the U.S. government for a 3-day port visit by the Taiwanese ships. The United States denied this request in a diplomatic note but did so without mentioning the strategic denial or defense veto provisions of the Compact. Even though the United States did not cite these provisions in its written denial, the RMI, in its reply, argued that the strategic denial and defense veto provisions were not appropriate in this case and that the government’s ability to conduct its own foreign relations must be respected. The United States dropped its objection to the proposed visit following this appeal and a February 2001 port visit by these same ships in Palau. (See app. IV for time lines detailing the history of the four principal Compact defense provisions.) Continued access to the Kwajalein Atoll in the RMI is the compelling U.S. defense or security interest in the FSM and the RMI that U.S. officials have identified. U.S. facilities located on Kwajalein complement the geographic characteristics that have helped to make the atoll an important part of U.S. ICBM testing, missile defense testing, and space surveillance operations. From a broader regional security perspective, the FSM and the RMI are not currently strategically important to the United States. In addition, other defense and security interests cited by U.S. officials, such as the right of strategic denial, the proximity of vital transit routes, and support in the United Nations, have been overstated. Senior U.S. policymakers agree that continued access to missile testing and space-tracking facilities on the Kwajalein Atoll in the RMI is the most important U.S. defense interest in the FSM and the RMI. DOD has described the U.S. Army facility on Kwajalein Atoll, known as the Ronald Reagan Ballistic Missile Defense Test Site, as an important and unique national asset that would be difficult and expensive to replace. In addition, the DOD agency responsible for missile defense testing, the Ballistic Missile Defense Organization (now the Missile Defense Agency), has determined that currently no acceptable alternative site exists for missile defense testing against ICBM class threats. The atoll has been the test site for ballistic missile systems for decades. The facility, which is one of two sites listed in the 1972 Anti-Ballistic Missile (ABM) Treaty between the United States and the Soviet Union, is used for long-range missile defense testing among other missions. According to the U.S. Army Space and Missile Defense Command (SMDC), the testing range’s remote ocean location in a sparsely populated area provides an acceptable environment for ballistic missile testing with minimal environmental impact; and the atoll’s location near the equator is beneficial for space object and foreign launch observation. To support missile testing activities, Kwajalein Atoll has become the home to sophisticated radar, optics, and telemetry equipment (see fig. 4). From a more regional or global point of view, the FSM and the RMI currently play no role in the execution of U.S. defense and security strategy. The East Asia Strategy Report, published periodically by DOD since 1990, refers to these countries as U.S. defense obligations, not as U.S. defense assets. Congressional hearings on U.S. defense and security issues in the Asia Pacific region since 1997 have been devoid of references to these countries. In addition, the United States has never officially responded to an offer the FSM, Guam’s neighbor, made in 1998 to preposition military forces in its territorial waters. Portions of a 1999 DOD Assessment of U.S. Defense and Security Interests in the region provided to us by the FSM and the RMI also concluded the United States has no current requirement to preposition equipment in either of these countries. Finally, the former and current ambassadors to these countries, as well as representatives from DOD’s Pacific Command, have told us that the FSM is no longer strategically important to the United States, while the RMI only remains important because of Kwajalein. In 2001, two reports called for increasing the U.S. presence in the Western Pacific, but neither offered any definite role for the FSM or the RMI. DOD’s 2001 Quadrennial Defense Review, released on September 30, sets out a new strategic vision for defense planning purposes. The review noted the U.S. overseas presence posture, concentrated in Western Europe and Northeast Asia, was inadequate for the new strategic environment in which U.S. interests are global and potential threats are emerging in other areas of the world. The report called for, among other things, increasing U.S. presence in the Western Pacific. As a result, the Navy will increase its air craft carrier presence in the Western Pacific and explore basing options for an additional three to four naval combat vessels and guided cruise missile submarines in that area, while the Air Force will ensure that sufficient refueling and logistics support capabilities are in place. DOD has stated that the FSM and the RMI may not ultimately be involved in any of the above decisions. A 2001 RAND report on U.S. force posture in Asia reached some of the same conclusions as the Quadrennial Defense Review when it highlighted Guam as the most suitable location for an increased U.S. Air Force presence in the region. In addition to Kwajalein, U.S. policymakers have cited three main U.S. interests in the FSM and the RMI: strategic denial, sea lines of communication, and support from the FSM and the RMI for U.S. positions in the U.N. General Assembly. However, assessments concerning strategic denial and its contribution to U.S. security are mixed. Furthermore, our analyses concluded that the effect of strategic denial, the importance of sea lines of communication in the region, and the degree of support received from the FSM and the RMI for U.S. positions in the United Nations have been overstated. First, there is a lack of consensus about the value of strategic denial in the post-Cold War era. Different elements of DOD and the Department of State have offered a range of opinions on the subject, calling the policy everything from “essential” to “irrelevant.” In the past 3 years, strategic denial has been described as “essential” to counter future uncertainty in the region, by the Office of the Assistant Secretary of Defense for International Security Affairs; “a very real interest,” if not as urgent as during the Cold War, by the Assistant Secretary of State for East Asia and the Pacific; “a prudent insurance policy” for U.S. security in the Pacific, by the Department of State’s Office of Compact Negotiations; and “a policy of the past” that is “irrelevant now with the end of the Cold War,” by the Commander in Chief, Pacific Command. Furthermore, statements that have overstated the scope of strategic denial raise questions about the value assigned to this U.S. right and its contribution to U.S. defense and security interests. Strategic denial only covers the land and the 12-mile territorial waters around each island of the FSM and the RMI (see fig. 5). The geographic limits of strategic denial were defined by section 461(c) of the Compact, which states that the FSM and the RMI include the land and water areas to the outer limits of the territorial sea and air space above such areas as recognized by the United States. The United States, as a result of its acceptance of most of the provisions in the 1982 U.N. Convention on the Law of the Sea as customary law, recognized the 12-nautical mile limit for the FSM and the RMI’s territorial seas and therefore for strategic denial. However, various statements by U.S. and foreign officials have described strategic denial as exclusive U.S. military control over a large, contiguous area of the Pacific Ocean. Specifically, An official in the Office of Compact Negotiations at the Department of State described strategic denial as “the most significant U.S. interest at the time the Compact was negotiated” because of the value placed on denying military access to “over half a million miles of the Pacific Ocean between Hawaii and Guam” in a paper presented at the 2001 Island State Security Conference. The Assistant Secretary of State for East Asia and the Pacific testified at a 1998 congressional oversight hearing on the Compact that strategic denial “means taking a vast stretch of the Pacific and maintaining U.S. military control and ensuring we could deny access to the ships of other countries.” A staff briefing paper submitted for the record during the same 1998 hearing stated that the U.S. right of strategic denial and defense veto gave the United States “exclusive military rights and legal defense veto over third party use of any land, ocean, or airspace of the islands.” This paper stated that strategic denial included the islands’ 200-mile exclusive economic zone, “an area larger than the continental United States” (see fig. 5). The RMI Minister of Foreign Affairs and Trade testified in the 1998 hearing that the RMI “provides the United States strategic denial rights over 1 million square miles of the Central Pacific.” Finally, in a paper presented at the 2001 Island State Security Conference, the Executive Director of the Joint Committee on Compact Economic Negotiations for the FSM stated that “strategic denial and the defense and security concessions in the Compact established an internationally recognized U.S. zone of influence covering the 1,000,000 square miles of the FSM’s exclusive economic zone in the western Pacific.” These statements, if taken literally, not only overstate the scope but also the effect of strategic denial. While the right of strategic denial prohibits third countries from establishing land-based operations in the FSM and the RMI, the United States cannot use this right to prevent ships from conducting military activities outside of the 12-mile territorial waters of these countries. For example, in the mid-1980s and early 1990s, there were numerous reports of Russian trawlers collecting information in the waters around Kwajalein. Further, the United States recognizes that under international law and custom, military vessels have a right to “innocent passage” through the coastal waters of the islands. According to DOD and the Department of State, these rights are identical to those that the United States exercises in its own territorial waters. However, Department of Defense officials have noted that in denying third-country access to land facilities, the right of strategic denial limits the ability of other nations to undertake long-term naval operations in the area, and makes activities in the region, such as surveillance, more costly. The importance of sea lines of communication, or sea routes, that run near or through the FSM and the RMI is another area in which the value of U.S. interests has been overstated. While U.S. policymakers have stated that the critical commercial and military transit routes run near or through the FSM and the RMI, there is evidence to the contrary. Officials from the Department of the State and the U.S. Army in the RMI told us that one of Kwajalein’s positive qualities was its isolated location, away from commercial shipping lines. In addition, a 1992 analysis of U.S. defense interests in the Pacific Islands stated that the FSM and the RMI lie well to the south of many north Pacific sea and air lines in peacetime; it is only when these north Pacific lines are threatened that air and sea movements would shift southward to minimize adversary interdiction. Our analysis of U.S. trade flows in the Pacific supports these two assessments. Of the less than 23 percent of total U.S. trade that crosses the Pacific, more than 61 percent (or about 14 percent of total U.S. trade) involves Japan, China, Taiwan, and Korea, all of which lie north of the FSM and the RMI. Other discussions of Pacific sea lines by U.S. officials and policy analysts have concentrated on chokepoints in Southeast Asia (see fig. 6). An analysis of these chokepoints in a 1996 National Defense University publication, stated that in the event all the strategic straits in Southeast Asia are closed or blocked, trade flows originating from the Middle East and South Asia could be rerouted south of Australia. Depending on the final destination of these goods, the rerouted ships could possibly pass near or through the FSM. Although the chokepoints analysis does not specifically illustrate how U.S. trade flows from this area would be affected, it appears they would transit south of the FSM and the RMI in this scenario. Finally, the level of support from the FSM and the RMI for U.S. positions in the U.N. General Assembly has been overestimated. Although U.N. voting does not directly relate to U.S. defense and security interests, U.S. government officials consistently referred to the support of these countries in the United Nations as one aspect of the strategic importance of these countries to the United States. In fact, an official in the Department of State’s Bureau of International Organizations called the FSM “the number one friend of the United States at the United Nations,” while the RMI was referred to as “one of the better members” of the General Assembly. These assessments were based on measures of voting coincidence that appeared in the 2000 edition of the department’s report to Congress, Voting Practices in the United Nations. In 2000, the FSM was said to have voted with the United States 100 percent of the time, while the RMI was credited with casting an identical vote about 74 percent of the time. However, the Department of State’s methodology does not take into consideration those occasions when the countries were absent or abstained from voting. Including these absences and abstentions drops the countries’ voting coincidence numbers to about 54 percent and 52 percent, respectively (see table 1). While these countries have agreed with the United States about as often as the average NATO country, support on a few issues identified as important by the Department of State, such as votes involving the Middle East and other issues where the United States is often isolated, and the numbers reported in the Department of State report have led to a perception of much stronger support than our analysis indicates (see app. V for more discussion of the Department of State report Voting Practices in the United Nations). The ongoing Compact negotiations have resulted in agreements in principle between the United States and the FSM and the RMI, respectively, to continue their existing defense and security relationships. Without a renewal of the Compact’s defense provisions, one of the four primary U.S. defense rights and responsibilities will completely expire at the end of the negotiating period in 2003—the U.S. defense veto. U.S. officials believe that continued economic assistance is important to reaching a final agreement on renewing the Compact’s defense provisions, providing a favorable environment for the United States to exercise its defense rights, such as strategic denial and Kwajalein access, and advancing U.S. interests. All parties to the current Compact negotiations have expressed their intent to preserve the status quo on defense and security matters. During negotiations with each country, the United States and the FSM and the RMI, respectively, have issued joint statements calling for the continuation of the defense and security relationship set forth in Title Three of the Compact. If such an agreement is reached, the U.S. defense veto would be extended as well as the U.S. obligation to defend these countries as the United States defends itself and its citizens. If an agreement on economic assistance is not reached by 2003, the defense veto will expire; and the United States will retain a lesser, albeit still significant, obligation to defend the FSM and the RMI. According to a representative from DOD’s Pacific Command, U.S. defense interests would not be hurt by the loss of the defense veto. Finally, the United States has already secured continued access to Kwajalein through 2016, by exercising its option to unilaterally extend the Military Use and Operating Rights Agreement with the RMI. Officials from the Department of State’s Office of Compact Negotiations have indicated that the agreement in principle to extend the defense and security provisions contained in Title Three is part of a package (as indicated in the joint statements signed by the parties) that would also include continued U.S. economic assistance, as well as various other measures, such as increased accountability over the use of Compact funds. In addition, statements from both DOD and the Department of State have described linkages between continued economic assistance and the ability of the United States to exercise its defense rights. A June 2001 statement, by a representative from the Department of State’s Office of Compact Negotiations, argued that continued economic assistance was justified by U.S. interests such as strategic denial, political and economic stability, support for U.S. positions in international and regional organizations, access to Kwajalein, and the need to provide a positive context for the United States to exercise its defense rights. Similarly, in a June 2000 congressional hearing on the Compact, an official from the Office of the Assistant Secretary of Defense for International Security Affairs, stated that providing continued Compact assistance was in the best interest of the United States because it helps preserve access to key defense interests for our forces while denying potentially hostile forces access to U.S. economic and defense interests in the region. Finally, the Executive Director of the Joint Committee on Compact Economic Negotiations for the FSM, has stated that the defense rights delegated to the United States under the Compact are linked to the economic assistance provided by the United States. Furthermore, it is the FSM’s position that the economic, political, and security goals of the Compact are closely interrelated; thereby making continued economic assistance an important part of the sustained political development and economic advancement necessary to attain the mutual security goals of the FSM and the United States. We provided a draft of this report to DOD, the Department of State, and the Department of the Interior, as well as the governments of the FSM and the RMI, for comment. The Departments of State and the Interior chose not to provide comments on the draft report. Regarding its decision not to submit comments, the Department of State said that it had been working with us since June 2001, when we presented this material in briefings to congressional staff, and had, during that time, made its views on U.S. defense interests in the FSM and the RMI known. DOD emphasized in its comments that the U.S. right to exclude third-country militaries from the territory of the FSM and the RMI remains an important one due to future uncertainty about events in the region. It also noted that it would be unwise to assume that the end of the Cold War has lessened the strategic importance of Micronesia to U.S. interests. In our response to DOD’s letter, we cite a passage from a DOD assessment that states that the strategic importance of the FSM and the RMI has in fact lessened over the past 50 years. The FSM government also disagreed with our conclusion that the FSM currently lacks broad strategic importance for the United States and that the importance of certain security interests involving the FSM has been overstated. In its comments, the RMI government stressed its strategic significance and historic contribution to the United States as a site of nuclear test and argued that the rights granted to the United States under the Compact have been significant. The RMI government also expressed the view that we have not properly characterized the relationship between the United States and the U.N. Trust Territory of the Pacific Islands at the time of Compact negotiations and thus had overemphasized the U.S. desire to address Cold War concerns in the Compact, while de-emphasizing the role other issues played in the negotiations. We disagree with most points made by the FSM and RMI governments; and, in responding to comments from these two countries, have made reference to report passages that support our views. The RMI government also stated that we should distinguish between economic assistance provided to the FSM and the RMI. We agree, and have provided separate assistance figures for each country. Comments received from DOD, as well as the FSM and RMI governments, and our assessments of them are included in appendixes VI through VIII. We are sending copies of this report to the Secretary of Defense, the Secretary of State, the Secretary of the Interior, the President of the FSM, the President of the RMI, and interested congressional committees. We will also make copies available to other interested parties upon request. If you or your staff have any questions regarding this report, please call me at (202) 512-4128. Other GAO contacts and staff acknowledgments are listed in appendix IX. In June 2001, we briefed the staffs of the Chairman of the House Committee on Resources, the Ranking Minority Member of the House Committee on International Relations, the Chairman of the Subcommittee on East Asia and the Pacific, House Committee on International Relations, and Congressman Bereuter on defense and security issues related to the 1986 Compact of Free Association and the ongoing negotiations taking place between the United States and the Federated States of Micronesia (FSM) and the Republic of the Marshall Islands (RMI). Specifically, our briefing addressed (1) whether and how the United States has exercised its defense rights and fulfilled its defense responsibilities under the Compact, (2) the current U.S. defense and security interests in the FSM and the RMI, and (3) defense and security issues that are being addressed in the ongoing Compact negotiations. Since June, we have conducted additional audit work in response to questions raised during those briefings. These questions prompted us to address the uniqueness of the U.S. obligation to defend these islands, the influence of foreign governments in the region, and the utility of some defense provisions in the current Asia-Pacific security environment. To address this objective, we reviewed the Compact’s defense provisions (Title Three) as well as the related defense agreements (the mutual security agreements, the military use and operating rights agreements, and the Status of Forces Agreement) and discussed these documents with Department of Defense (DOD) and Department of State officials to identify the principal defense and security provisions. We also reviewed the congressional hearing record on the Compact, going back to 1984 oversight hearings, to determine the specific defense and security provisions that were focused on in statements and discussions. We then discussed the degree to which the U.S. government has invoked its defense rights or discharged its defense responsibilities with these same officials (DOD agencies interviewed included the Office of the Secretary of Defense, the Office of the Joint Chiefs of Staff, the U.S. Pacific Command, the U.S. Army Space and Missile Defense Command, and the Ballistic Missile Defense Organization. Department of State offices interviewed included the Bureau of East Asia and Pacific Affairs, the Office of the Legal Advisor, and the Office of Compact Negotiations). We also interviewed Department of State officials and reviewed Department of State documentation pertaining to the recent visit of Taiwanese ships to the RMI and Palau. To review U.S. operations at Kwajalein Atoll, we visited the atoll islands of Kwajalein and Roi-Namur in April 2000 to tour the facilities and discuss DOD activities on the islands with U.S. government officials, including the range Commander, as well as contractor personnel. We also visited the nearby island of Ebeye and toured facilities built by the U.S. military, as well as housing used by relocated mid-atoll Marshallese citizens. We also discussed Ebeye development projects involving schools, hospitals, and infrastructure improvements, with local development authority officials and reviewed associated documentation. To conduct our work in this area, we discussed U.S. defense and security interests in the FSM and the RMI with officials from DOD, the Department of State, the Central Intelligence Agency, and the Defense Intelligence Agency. Furthermore, we obtained the views of the former U.S. Ambassador to the FSM and the current and former U.S. ambassadors to the RMI. We reviewed DOD reports (2001 Quadrennial Defense Review, East Asia Strategy Reports and classified assessments of U.S. defense and security interests in the countries), statements by the Commander in Chief of the U.S. Pacific Command, congressional testimony on the Compact (from 1984 through 2000) and U.S. defense interests in the Asia Pacific region (from 1998 through 2000), and the 2001 RAND report entitled The United States and Asia: Toward a New U.S. Strategy and Force Posture. We also reviewed the legislative history of the Compact. For our examination of the scope and effect of strategic denial, we reviewed the 1982 United Nations (U.N.) Convention on the Law of the Sea, received a legal interpretation of the relevant Compact provision from DOD and the Department of State, located and examined statements in the congressional record, interviewed officials from DOD and the Department of State, and worked with the National Imagery and Mapping Agency to produce a map of the territorial boundaries of the FSM and the RMI. For our examination of important sea lines of communication, we reviewed statements from congressional hearings on the Compact that referred to these sea routes; analyzed Department of Commerce data on U.S.-Pacific trade flows (2000 data on total trade by U.S. Pacific ports); explored the issue of chokepoints in academic papers, government documents, and Chokepoints: Maritime Economic Concerns in Southeast Asia; and studied works on U.S. interests in the region written by former U.S. officials, such as The United States and the Pacific Islands, by John Dorrance. Finally, for our examination of voting in the U.N. General Assembly, we analyzed the data on the voting behavior of the FSM and the RMI contained in the Department of State’s annual report Voting Practices in the United Nations and data from the United Nations on voting margins, and interviewed current and former Department of State officials from the Bureau of International Organization Affairs, the Bureau of East Asia and Pacific Affairs, and the U.S. Mission to the United Nations. To address our third objective, we examined the Compact and its related agreements to determine the status of certain defense provisions after 2001; interviewed officials from DOD and the Department of State as well as the FSM and RMI governments; and reviewed joint communiqués issued in 2001 by the U.S. government and the governments of the FSM and the RMI, regarding negotiating principles related to defense matters. We performed our work at various points from December 1999 through October 2001, simultaneously with our efforts for other related assignments. Our work was conducted in accordance with generally accepted government auditing standards. As mentioned in this report, the defense veto contained in the Compact’s Title Three is due to expire in 2001 (or 2003 if negotiations continue for an additional 2 years). In addition to this provision, Title Three contains other provisions that are due to expire in 2001 or 2003. These include provisions stating that: The government of the United States shall not, in the FSM or the RMI, test by detonation or dispose of any nuclear weapon, nor test, dispose of, or discharge any toxic chemical or biological weapon. The government of the United States may invite members of the armed forces of other countries to use military areas and facilities in the FSM or the RMI, in conjunction with and under the control of U.S. armed forces. If, in the exercise of its authority and responsibility under Title Three, the government of the United States requires the use of areas within the FSM or the RMI in addition to those for which specific arrangements are concluded, it may request the government concerned to satisfy those requirements through leases or other arrangements. The FSM or RMI governments shall sympathetically consider any such request and shall establish suitable procedures to discuss it with and provide a prompt response to the U.S. government. The government of the United States shall provide and maintain fixed and floating aids to navigation in the FSM and the RMI at least to the extent necessary for the exercise of its authority and responsibility under Title Three. Subject to the terms of the Compact and related agreements, the government of the United States, exclusively, shall assume and enjoy, as to the FSM and the RMI, all obligations, responsibilities, rights and benefits of any defense treaty or other international security agreement applied by the government of the United States as Administering Authority of the Trust Territory of the Pacific Islands as of the day preceding the effective date of the Compact and any defense treaty or other international security agreement to which the government of the United States is or may become a party that it determines, after appropriate consultation with the FSM or RMI government, to be applicable to the FSM or the RMI. Any citizen of the FSM or the RMI shall be eligible to volunteer for service in the armed forces of the United States. (Of note, volunteers must meet the required mental, physical, and moral qualifications to join the U.S. armed forces. For 1998, 42 FSM citizens and 8 RMI citizens enlisted in the U.S. Army). The government of the United States shall have enrolled, at any one time, at least two qualified students, one each from the FSM and the RMI, in each of the U.S. Coast Guard Academy and the U.S. Merchant Marine Academy. The governments of the United States and the FSM or the RMI shall establish two Joint Committees empowered to consider disputes under the implementation of Title Three and its related agreements. In addition to these Title Three provisions, the Military Use and Operating Rights Agreement with the FSM, which authorizes up to four Civic Action Teams (CAT) in the FSM, will also expire in 2001. There are currently three CATs in the FSM. CATs are to conduct activities that focus on the special development needs of the country and are to provide training for the local population in general engineering skills. CAT teams work on projects (such as roads and school improvements) that the host governments identify. The teams are composed of one officer and 12 enlisted men and are shared between the Army, Navy, and Air Force. The CAT team budget for fiscal year 2001 was close to $2 million, according to a DOD official. This official told us that while CAT costs are to be shared between the United States and host governments, the United States has not been receiving the required funds from the FSM. The U.S. government has raised concerns that CAT teams are idle too much of the time and work on projects that quickly fall into disrepair. The United States has maintained a military presence in the Marshall Islands for several decades, and DOD currently conducts ballistic missile and missile defense testing on Kwajalein Atoll. U.S. equipment on the atoll also allows for space observation, identification, and tracking activities. The U.S. government, which provides funding to the landowners of the Kwajalein Atoll through the RMI government and is a key employer in the RMI, has also experienced some difficulties with the local Marshallese population. No recent studies have been completed regarding whether there is an acceptable alternative site to Kwajalein Atoll for all U.S. defense-related activities conducted there. The United States has had a military presence on the Marshall Islands in the central Pacific Ocean since liberating the islands from the Japanese in 1944 in Operation Flintlock. The U.S. government conducted nuclear tests in these remote islands near the equator during the 1940s and 1950s, and a military base was constructed on Kwajalein Atoll to support this testing (see fig. 7). In 1959 Kwajalein was selected as the testing site for the NIKE- ZEUS Anti-Missile System. In 1964, control of this missile testing range was transferred from the U.S. Navy to the U.S. Army. During the 1960s and 1970s, the range was used to test rocket systems such as NIKE-ZEUS, Sprint/Spartan, and Minuteman. Kwajalein Atoll is currently home to missile and missile-defense testing and space tracking facilities that use land provided to the U.S. government under a Compact-related agreement, the Military Use and Operating Rights Agreement with the RMI. In September 1999, the U.S. government exercised its right to unilaterally extend the agreement, giving the United States access to Kwajalein Atoll until 2016. The RMI government pays Kwajalein Atoll landowners for U.S. use of the atoll. Most U.S. equipment is located on the Kwajalein Atoll islands of Kwajalein and Roi-Namur, though some equipment is maintained on five other islands in the atoll. The U.S. testing range on Kwajalein is under the authority of the U.S. Army Space and Missile Defense Command (SMDC), and as of June 2001, it became officially known as the Ronald Reagan Ballistic Missile Defense Test Site. The test site, which is government owned and contractor operated, is home to about 75 U.S. government personnel as well as about 1,600 contractor staff and 1,000 family members. SMDC estimates that the facility represents a $4 billion investment. The U.S. range on Kwajalein Atoll is used for intercontinental ballistic missile (ICBM) testing (see fig. 8). One ICBM system that currently uses Kwajalein for testing is the Minuteman III. Three tests per year of this system, which was developed in the late 1950s, occur at Kwajalein. Another ICBM system is the Peacekeeper (one test/year), the newest U.S. ICBM strategic weapon system. Furthermore, this range is used for long-range missile defense testing. Seven national missile defense tests have been conducted, with the most recent test in December 2001. Range equipment is also used to conduct space observation, identification, and tracking activities. The range has provided more than 32,000 observations for updating the catalog of near-earth and deep-space objects. It also responds to assignments for the tracking of new foreign launches (commercial and military, announced and unannounced) and provides radar images of high-interest satellites. The facility also supports the National Aeronautics and Space Administration’s manned and unmanned space operations and experiments. To support these activities, the missile range at Kwajalein possesses a unique collection of technical equipment. The core of the range’s instrumentation is the Keirnan Reentry Measurements Site, a sophisticated radar suite. The radar sensors are located on the island of Roi-Namur. Data are collected across the radar frequency spectrum with a high degree of accuracy and are analyzed by the Massachusetts Institute of Technology’s Lincoln Laboratory and other facilities. The Kwajalein range also has ground-based optics such as tracking instruments, ballistic cameras, and documentary photography systems. In addition, twelve antennas are used to receive, record, and process flight data. Furthermore, the range has a deep-water acoustic sensor array located in the ocean area off the east reef of Kwajalein Atoll that can determine the precise location of reentry vehicle impacts. A submersible vehicle is also available to locate debris within the Kwajalein lagoon. Finally, the range has a launch site on Meck Island, with additional launch facilities on other RMI islands as well as Wake Island. The U.S. military presence on Kwajalein Atoll has led to tension with the Marshallese population on the atoll over the years. For example, there were four periods of protests by Marshallese landowners of the Kwajalein Atoll prior to enactment of the Compact. According to an SMDC official, these protests occurred because landowners were concerned that (1) the U.S. government was not paying enough for its use of various Kwajalein Atoll islands and (2) following enactment of the Compact, all payments to landowners and future negotiations regarding use of the atoll would be conducted on a government-to-government basis, bypassing any direct dealings with landowners. During the protests, the landowners occupied Kwajalein Atoll islands, including Kwajalein and Roi-Namur. While no major missile tests were delayed or cancelled as a result of the protests, two test missions scheduled for August 1979 were cancelled. Protests during the 1980s reportedly disrupted the community on Kwajalein and put a strain on security forces. Furthermore, the range is a top employer in the Marshall Islands, with about 1,400 Marshallese employed at the facility and earning a higher wage than is reportedly available elsewhere in the country. These Marshallese who are employed at the range are generally not permitted to live on Kwajalein Island and so live on the small nearby island of Ebeye. In addition, in 1965 the U.S. Army relocated Marshallese citizens living on mid-atoll islands to Ebeye so that ballistic missile testing could be conducted more safely within the mid-atoll area. Ebeye is severely overcrowded, with more than 9,300 people living on about 90 acres of land (see fig. 9). Efforts to improve the quality of life on the island, such as the provision of electricity and potable water, have experienced failures in recent years. Conditions on the island have reportedly deteriorated over the last decade, though numerous efforts are now being planned or are under way to improve the quality of life on Ebeye. In 1979, DOD conducted an analysis of possible locations for relocating U.S. facilities on Kwajalein Atoll. Key criteria used to determine the best alternative site were political supportability, land availability, and population distribution. DOD determined that the Northern Mariana Islands were the best alternative to Kwajalein Atoll for establishing a major DOD test range, with an estimated investment cost of over $2 billion (in 2000 dollars). Other alternative sites were located in the state of Chuuk in the FSM and in Kiribati, located southeast of the RMI. DOD officials now view this study as outdated. DOD has not conducted a detailed study examining potential alternative sites for all the activities undertaken at that U.S. facility on Kwajalein since 1979. However, the DOD agency responsible for missile defense testing, the Ballistic Missile Defense Organization, has conducted some analysis of alternatives to Kwajalein and has determined that currently no acceptable alternative site exists for missile defense testing against ICBM class threats. The United States acquired four primary defense and security rights and responsibilities as a result the Compact of Free Association and its related agreements: (1) the obligation to defend the FSM and the RMI against attack; (2) the right to deny access to foreign militaries and foreign military activity (strategic denial); (3) the right to prevent the FSM and the RMI governments from acting in a way that is incompatible with U.S. authority and responsibility for defense and security matters (defense veto); and (4) the right to use certain land (i.e., Kwajalein Atoll in the RMI) for military purposes. Figures 10 through 13 describe the legal provisions in which these rights and responsibilities are contained, the extent that each provision has been used since the Compact was enacted in 1986, and what happens to each provision if agreement is not reached on its renewal before the negotiating period ends in 2003. While the support of the FSM and the RMI for U.S. positions in the United Nations is not directly related to U.S. defense and security interests, U.S. officials cite this support and support in other international fora as a reason for why these islands are strategically important to the United States. The primary source that officials refer to in these statements is the Department of State’s annual report on Voting Practices in the United Nations. This report, which has used a consistent methodology to compare the votes cast by countries in the U.N. General Assembly with U.S. votes, has been incorrectly interpreted and used to overstate the level of support provided by the FSM and the RMI. By excluding instances where these countries were absent or abstained in their interpretation of this report, officials have overlooked the report’s cautionary message in its methodology section. The report indicates that abstentions and absences are often difficult to interpret, but they make a mathematical difference, sometimes major, in the voting coincidence results. The case of Palau, a country near the FSM and the RMI, illustrates this point. An official in the Bureau of International Organizations at the Department of State characterized Palau as the number-two friend of the United States in the General Assembly because of its 100-percent voting coincidence with the United States in 2000. However, this percentage is based on just 11 identical votes cast out of a possible 65 votes (about 17 percent) because Palau’s 2 abstentions and 52 absences are not included in the voting coincidence percentage. Table 1 in our letter shows these differences for the FSM and the RMI. The FSM and the RMI have also gained visibility by supporting the United States on important issues in the General Assembly. Each year the Department of State report highlights about 13 votes (or 18 percent of total General Assembly votes) on issues the United States considers important, such as arms control, Middle East issues, and human rights. On some of these issues, the United States is one of only a few dissenters, making FSM or RMI support highly visible. However, officials from the Department of State and the FSM concede that this support has more symbolic significance than actual significance given the overwhelming margins on these votes. For instance, during the 2000 General Assembly, the FSM joined the United States and Israel as the only dissenters on a resolution concerning the risk of nuclear proliferation in the Middle East (the RMI was one of only 8 countries who abstained), and the RMI joined the United States and Israel as the only dissenters on a resolution critical of the U.S. embargo of Cuba (the FSM was absent). The vote totals for these resolutions were 157-3-8 (for-against-abstain) and 167-3-4 respectively. Table 2 contains information on the number of votes the FSM and the RMI have cast that are either identical to or the opposite of United States votes on important issues, as well the number of times they have abstained or been absent, since their induction into the United Nations in 1991. While the level of support by the FSM and the RMI for U.S. positions in the U.N. General Assembly has been overstated, these countries have, in recent years, achieved a level of support that resembles the average North Atlantic Treaty Organization (NATO) country (see figs. 14 through 16). A closer look at the voting profiles of the FSM, the RMI, and NATO also reveals the importance of acknowledging abstentions and absences in measures of voting coincidence. For example, in 2000, the FSM cast 35 votes (out of 65) identical to those cast by the United States, while the RMI and the average NATO country each cast 34 identical votes. However, due to the exclusion of abstentions and absences from its calculations, the Department of State reported voting coincidence percentages for the FSM, the RMI, and the average NATO country that ranged from about 100 percent for the FSM to 74 percent for the RMI to 63 percent for NATO. The following are GAO’s comments on the letter from DOD dated December 7, 2001. 1. This report does not determine whether the right of strategic denial is essential. However, we did find that (1) strategic denial has never been invoked (see p. 13); (2) there is a lack of consensus among U.S. policymakers concerning its value in the post-Cold War era (see p. 17); and (3) the scope and effect of this right have been overstated in public statements by officials from the United States, the FSM, and the RMI (see p. 18). 2. The cited DOD study reached a different conclusion on how the strategic importance of Micronesia has changed over time than the one reported in DOD’s letter. According to unclassified portions of this 1999 assessment, the strategic importance of Micronesia to the defense of American national interests has clearly lessened in the 50 years since World War II. The study explained that this is the result of a number of factors, including the advent of intercontinental, nuclear-armed missiles; refuelable, long-range aircraft; and ballistic missile-carrying submarines, as well as increases in the operating range and at-sea endurance of America’s surface naval forces. Finally, the study stated that the end of the Cold War appears to have removed the only current blue-water navy and long-range aviation threat to U.S. forces in the Pacific. This is consistent with our conclusion about the FSM and the RMI’s current lack of broad strategic importance to the United States (see pp. 16-17). The following are GAO’s comments on the letter from the government of the FSM dated November 19, 2001. 1. We consulted with DOD on numerous occasions following September 11, 2001, to ensure that the conclusions reached in this report still reflected current U.S. interests in the Asia Pacific region. In addition, on pp. 16-17 we discuss the Quadrennial Defense Review, which, when it was released on September 30, set out a new strategic vision for defense planning purposes. Finally, with regard to the future Asia Pacific security environment, DOD did not, in response to our request, provide us with specific information on how the Compact’s defense provisions might aid the United States in its response to potential threats such as conflict on the Korean Peninsula, territorial disputes in the South China Sea and Northeast Asia, and separatism in Indonesia. 2. We acknowledge that such statements have and continue to be made by senior U.S. policymakers. We examined these statements and gave officials at both DOD and the Department of State the opportunity to provide specific examples of the FSM’s strategic importance in the current security environment. In response, we received some general information, such as the views of several DOD officials concerning the utility of strategic denial, which are noted on p. 19. However, this information did not change the conclusion we reached on pp. 16-17 about the FSM currently lacking broad strategic importance for the United States. DOD reached a similar conclusion in its 1999 assessment of U.S. interests in the Freely Associated States (FAS) – the FSM, the RMI, and Palau. See p. 52, comment 2 for additional information on DOD’s conclusion. 3. We maintain that the effect of strategic denial, the importance of sea lines of communication in the region, and the degree of support received from the FSM for U.S. positions in the United Nations have been overstated. See p. 63, comments 9-12 and 14, and p. 64, comment 16 for more detailed information. 4. Our report concludes that continued U.S. access to facilities on the Kwajalein Atoll in the RMI is both the key and compelling U.S. defense interest in the FSM and the RMI. In this context, “key” means important, fundamental. Kwajalein is the most important U.S. defense interest in the two countries. In this context, “compelling” means convincing. Among the U.S. interests commonly cited in the FSM and the RMI, including Kwajalein, strategic denial, sea lines of communication, and U.N. support, we found the evidence supporting Kwajalein’s importance most convincing. 5. See comment 2. We repeatedly sought to obtain the factual and detailed underpinnings that support Dr. Campbell and Mr. Smith’s statements, but DOD did not provide this information. 6. See comment 1. The focus of this report is on current U.S. defense interests in the FSM and the RMI. However, we examined the potential role of the FSM and the RMI with regard to the Quadrennial Defense Review on pp. 16-17 and noted DOD’s views that the FSM and the RMI may not be included in DOD plans to increase the U.S. presence in the Western Pacific. 7. The official U.S. Pacific Command position on the strategic importance of the FSM is classified. This information, as well as classified details of the 1999 DOD Assessment of U.S. Interests in the FAS, was presented to the requesters of this report in June 2001. Further, the views from the U.S. Pacific Command officials, which are included in our report, were collected from individuals specifically designated by the Command to respond to our questions. 8. The U.S. Pacific Command has told us that the United States has access to airfields throughout the FAS. According to the Air Mobility Operations Center within the Pacific Command Air Force Operations Center, the U.S. Air Force (USAF) does not use Yap and Chuuk for refueling as a matter of routine operations. As a rule, when USAF fighters transit the Pacific Command’s Area of Responsibility they have tanker escort, which means they do not need to refuel on the ground. The Air Mobility Operations Center does not keep track of fighter refueling and cannot verify whether any USAF fighters have refueled at Yap or Chuuk. However, a Pacific Command representative stated that it is quite possible that the Marines or Navy could have dropped in for fuel, but there is no way to provide an accounting of how many times and for what reasons. He stated that there have been literally hundreds of flights transiting the Pacific Command’s Area of Responsibility in support of Operation Enduring Freedom. U.S. pilots are given a great deal of latitude; and, given countless possible scenarios, some could have dropped into the FSM to refuel. Finally, he stated that Palau and Guam have also been used recently for refueling purposes, with Guam used more often than small airfields when it is convenient. However, carrier-based aircraft transiting the Pacific Command’s Area of Responsibility might find a more direct route by flying through the FSM or the RMI rather than Guam. 9. This report does not conclude that the value of strategic denial is overrated. However, we did find that (1) strategic denial has never been invoked (see p. 13); (2) there is a lack of consensus among U.S. policymakers concerning its value in the post-Cold War era (see p. 17); and (3) the scope and effect of this right have been overstated in public statements by officials from the United States, the FSM, and the RMI (see p. 18). Finally, with regard to the effective area of strategic denial, we acknowledge both the right to deny land access and the potential effect of this denial on the ability of other countries to conduct long- term naval operations (p. 19). 10. See p. 21, footnote 24 for a discussion of U.S. trade flows. Our analysis illustrates that most U.S. Pacific trade passes well north of the FSM and the RMI. 11. Of note, the examples offered here ignore the fact that strategic denial would prevent the use of the FSM by a third-party military to threaten Guam or sea lines. Also, in response to our questions on how U.S. interests would be affected if a third-party military had a presence in the FSM or the RMI, DOD focused exclusively on potential surveillance activities, not threats to Guam or shipping. 12. We have carefully examined these route charts and determined that they support our finding that the major sea lines of communication between the United States and Guam as well as key trading partners in Asia run north of the FSM and the RMI. In addition, we have amended footnote 23 on p. 21, to note that there are sea lines running between Australia and Japan that transit the FSM. Finally, these route charts appear to show that major sea lines between the United States and Australia lie close to 2000 kilometers away from the nearest point in the FSM. 13. We provided a classified briefing to our requesters in June 2001. This briefing included a discussion of contingency war plans and operational scenarios, as well as other information gathered from U.S. defense and intelligence agencies. 14. These specific instances of FSM support for U.S. positions were included in the draft provided to the FSM for comment (see app. V, p. 45, footnote 40, and p. 46, footnote 45). 15. Information on FSM citizens serving in the U.S. armed forces was included in the draft provided to the FSM for comment (see app. II, p. 31). 16. This report recognizes that absences and abstentions are an issue for all the coincidence numbers reported in the Department of State report in p. 23, footnote 25. Our methodology, which accounts for these absences and abstentions, was described as fair and valid by a former Department of State official who prepared the U.N. voting report for the past 12 years. We also compare the FSM favorably with U.N. support received from NATO on p. 23 (see also app. III, pp. 47-48). Our analysis of NATO voting on pp. 47, 48, and 50 applies the same methodology that we used to calculate the voting coincidences of the FSM and the RMI. Finally, we discuss FSM support on issues identified as important by the Department of State on pp 46-47. However, we note that lopsided vote margins in the U.N. General Assembly means this support is largely symbolic. The following are GAO’s comments on the letter from the government of the RMI dated November 19, 2001. 1. This report mentions two incidents where the defense veto, though not formally invoked, may have had some relevance. On p. 13 in footnote 14, we note that the RMI government once considered a plan to store third country nuclear waste in the RMI. The threat of the United States possibly invoking the defense veto, along with a change in RMI government leadership, may have been responsible for the RMI government’s final decision against providing storage. Furthermore, on p. 13 we noted initial U.S. government objections to a 2001 RMI port call by Taiwanese ships. While the U.S. government never mentioned the Compact’s defense veto provision during this incident, the RMI did cite the provision as not being appropriate in this particular instance. Finally, our objective was to determine which of the key provisions had been formally invoked, and both DOD and the Department of State have told us the defense veto remains unused. This report also does not attempt to assign value to the defense veto provision based on its lack of usage. 2. This report chose not to speculate on the role strategic denial may have played in deterring third country militaries from seeking to use the RMI, because data are not available to determine whether there are any third countries that would have had an interest in engaging in activities in the RMI in the absence of this right. We maintain that the evidence shows that the scope and effect of strategic denial have been overstated in public statements by officials from the United States, the FSM, and the RMI (see p. 18). 3. This report does not conclude that hostile actors or foreign powers will never again attempt to transit RMI waters or develop a presence in the RMI. Rather we note on p. 13 in footnote 13 that portions of a 1999 DOD assessment, provided to the RMI, stated that no outside threat to the FSM and the RMI is likely to emerge over the next 10 to 20 years, and there are no compelling security interests on the part of any Asian countries that would manifest themselves in any threat to the FSM and the RMI. This assessment also stated that no Asian country will have the military reach to pose a credible threat or domineering presence in the foreseeable future. 4. This report does acknowledge the importance of nuclear and missile defense testing in the U.S.-RMI relationship. Appendix III discusses U.S. activities in the Marshall Islands over the past 50 years. This report also notes that Kwajalein Atoll is cited by DOD as an “important and unique national asset that would be difficult and expensive to replace,” thus giving prominence to the RMI location where missile and missile defense testing occurs (see pp. 3 and 14). Reviewing U.S. nuclear testing activities in the Marshall Islands was outside the scope of our review, though the issue is mentioned in appendix III. For a discussion of the amount the United States has spent to address nuclear testing-related issues in the Marshall Islands, see our report Foreign Relations: Better Accountability Needed Over U.S. Assistance to Micronesia and the Marshall Islands (GAO/RCED-00-67, May 31, 2000). 5. This report states that the negotiation of expiring defense and economic Compact provisions provides the United States with the opportunity to reexamine its defense and security interests in the RMI and the FSM. We believe that this is a reasonable and prudent course of action and one that in no way suggests that the United States should unilaterally choose to end or alter commitments that require mutual termination by all parties involved. Of note, in a 1996 testimony, a Department of State official stated that while U.S. defense arrangements with the Freely Associated States (FAS) – the FSM, the RMI, and Palau — have contributed measurably to the security of the United States and the FAS, it is necessary to review the entire range of Compact security provisions in light of new global conditions and stringent fiscal realities as we near the end of the Compact period. 6. The U.S. obligation to defend the RMI and the FSM is mentioned in this report on p. 7 in order to demonstrate the unique relationship between the United States and the two Pacific Island nations, and is never referred to as a burden. This report also states on p. 8 that strategic denial, the defense veto, and access to RMI land are key provisions of the Compact that provide rights to the U.S. government. 7. We agree that the factors discussed by the RMI government over the next three pages—the relationship that developed between the United States and the RMI as a result of U.S. administration of the Marshall Islands under the U.N. trust, and U.S. nuclear testing during the 1940s and 1950s—played a key role in establishing an important framework for Compact negotiations. However, we maintain, after carefully reviewing the Compact’s legislative history, that the Compact’s specific security and defense provisions reflected Cold War concerns that existed at the time of the negotiations. We also note that the RMI government did not disagree when we cited three goals of the Compact in a September 2000 report that are also listed in this report: (1) securing self-government for the RMI and the FSM, (2) assuring certain national security rights for the RMI, the FSM, and the United States; and (3) assisting the RMI and the FSM in their efforts to advance economic self-sufficiency. Our earlier report also noted U.S. concerns about an expanded Soviet Union military presence in the Pacific at the time of Compact negotiations. In addition, a 1999 DOD assessment points out that the Compact was negotiated during the Cold War era in a vastly different politico-military and security environment, and a State Department official testified at a 2000 congressional hearing that the Compact was negotiated and enacted during the Cold War, when the Soviet Union had a growing presence in the Pacific. 8. Pages 1 and 6 of this report state that the Compact consists of two separate international agreements, one between the United States and the RMI, the other between the United States and the FSM. 9. We have revised footnote 5 on p. 6 of the report to show direct Compact funding provided to the RMI and the FSM separately for fiscal years 1986 through 1998. Further, on p. 2, footnote 1 and p. 6, footnote 5, we have separated total estimated Compact assistance (direct funding as well as U.S. programs and federal services) for the RMI from the total estimated assistance provided to the FSM. In addition to those named above, Ron Schwenn, Mary Moutsos, Mark Speight, and Rona H. Mendelsohn made key contributions to this report. Compact of Free Association: Negotiations Should Address Aid Effectiveness and Accountability and Migrants’ Impact on U.S. Areas (GAO-02-270T, Dec. 6, 2001). Foreign Relations: Migration From Micronesian Nations Has Had Significant Impact on Guam, Hawaii, and the Commonwealth of the Northern Mariana Islands (GAO-02-40, Oct. 5, 2001). Foreign Assistance: Lessons Learned From Donors’ Experiences in the Pacific Region (GAO-01-808, Aug. 17, 2001). Foreign Assistance: U.S. Funds to Two Micronesian Nations Had Little Impact on Economic Development (GAO/NSIAD-00-216, Sept. 21, 2000). Foreign Assistance: U.S. Funds to Two Micronesian Nations Had Little Impact on Economic Development and Accountability Over Funds Was Limited (GAO/T-NSIAD/RCED-00-227, June 28, 2000). Foreign Relations: Better Accountability Needed Over U.S. Assistance to Micronesia and the Marshall Islands (GAO/RCED-00-67, May 31, 2000). The General Accounting Office, the investigative arm of Congress, exists to support Congress in meeting its constitutional responsibilities and to help improve the performance and accountability of the federal government for the American people. GAO examines the use of public funds; evaluates federal programs and policies; and provides analyses, recommendations, and other assistance to help Congress make informed oversight, policy, and funding decisions. GAO’s commitment to good government is reflected in its core values of accountability, integrity, and reliability. The fastest and easiest way to obtain copies of GAO documents is through the Internet. GAO’s Web site (www.gao.gov) contains abstracts and full-text files of current reports and testimony and an expanding archive of older products. The Web site features a search engine to help you locate documents using key words and phrases. You can print these documents in their entirety, including charts and other graphics. Each day, GAO issues a list of newly released reports, testimony, and correspondence. GAO posts this list, known as “Today’s Reports,” on its Web site daily. The list contains links to the full-text document files. To have GAO E-mail this list to you every afternoon, go to www.gao.gov and select “Subscribe to daily e-mail alert for newly released products” under the GAO Reports heading. Web site: www.gao.gov/fraudnet/fraudnet.htm, E-mail: fraudnet@gao.gov, or 1-800-424-5454 or (202) 512-7470 (automated answering system).

Summary: The Compact of Free Association continues a defense arrangement that has existed between the United States and two Pacific island nations--Micronesia and the Marshall Islands--since the end of World War II. The United States has exercised only one of the four primary defense provisions contained in the Compact. That provision grants the United States the right to use part of the Kwajalein Atoll in the Marshall Islands to test nuclear missiles and space tracking operations. The United States has never been required to fulfill defense responsibilities under the other three defense provisions contained in the Compact. The Defense Department considers Kwajalein Atoll an important asset that would be costly and difficult to replicate. Ongoing negotiations over the Compact are following a course that would preserve the existing defense and security relationship between the United States and each of these nations.