COFA

The Compact of Free Association (COFA) or simply “the Compact” is a term for several related treaties and agreements between the United States and three Pacific Island nations. These three island groups were once part of the Trust Territory of the Pacific Islands (TTPI), but are now independent nation states. The three “Freely Associated States” are the Federated States of Micronesia (FSM), the Republic of Palau (ROP) and the Republic of the Marshall Islands (RMI). Broadly, the core of the Compacts between the US and each of these three nations are quite similar.

Background

The Palau, Caroline, and Marshall Islands were discovered and claimed by the Spanish, then sold to the Germans, and eventually seized by the Japanese early in World War One. After the Great War, Japanese control was formalized through designation of a “Mandate” by the League of Nations, allowing for Japan to govern the islands as integral portions of her own territory. The United States and its allies liberated these islands during the War in the Pacific and US rights and responsibilities were formalized through designation of a “strategic trusteeship” by the United Nations.

Having constituted a major portion of the US Trust Territory of the Pacific Islands (TTPI) until their establishment as newly independent nations, Palau, Micronesia, and the Marshall Islands entered into Compacts with the United States. These agreements provided them with direct economic assistance, access to US Government programs and services, as well as security and defense guarantees. The Compacts further afforded their citizens the ability to travel to, and reside within, the United States in the pursuit of education, employment and healthcare, eligibility for many domestic US programs and services on par with US citizens, as well as the ability to enlist in the United States military. The US, in turn, was provided with exclusive military access and base rights essential for its long-term strategic interests in access denial and asset dispersal in what has been termed as “the crossroads of the Pacific.”

The financial assistance portions of the Compact have been time-limited, in effect and then renewed for two decades at a time. In fact, this assistance is often errantly co-identified with the larger network of treaties and agreements, “the Compact,” of which they are only a portion.

Owing to shortcomings in implementation during so-called “Compact One,” these provisions were evolved and renewed for a second twenty-year period (often mistakenly termed “Compact Two”) and set to end in 2023. This second two-decade period saw introduction of additional US assistance for establishment of a jointly managed Trust Fund intended to provide assistance and development funding in the future. While a third and expanded round of twenty-year funding and assistance has been agreed upon, lawmakers in the United States have yet to ratify the treaty and approve the appropriations required to effect it.

US Assistance to Micronesia

Sector Grants

Direct economic assistance is provided annually in the form of Sector Grants for education, health, private sector development, public sector capacity building, environment and public infrastructure.

Special Education Grants

After the first twenty years of economic assistance, certain portions that had been tied to specific US domestic programs no longer in effect, or which had funding prerequisites that were mis-matched to conditions within the FAS, were grouped into the Special Education Grants, or SEG, and provided more directly as an addition to the Sector Grants.

These include program funding administered by the US Department of Education such as: Part A, Title I, Elementary & Secondary Education Act; Title I, Perkins Vocational & Technical Education Act; Subpart 3, Part A, Title IV, Higher Education Act; Part C, Title IV, Higher Education Act; Title II, Workforce Investment Act. Also include are funding administered by the Department of Health and Human Services such as the Head Start Act, as well as the Department of Labor administered Title I, Workforce Investment Act.

Programs and Services

Through the Compact, the three Freely Associated States enjoy service by, or significant support from, many United State Federal agencies and departments that typically only serve individuals, institutions and governments within the domestic United States.

Most visible may be the United States Postal Service, which partners with local postal agencies in Micronesia, Palau and the Marshalls to provide mail service to and from the United States at US domestic rates, as well as offering postal law enforcement assistance.

The National Weather Service provides weather services. The Department of Transportation supports airport improvement. The Department of Transportation in cooperation with the Federal Aviation Administration provide funding and technical support for civil aviation safety and economic development.

The Federal Emergency Management Agency in partnership with the US Agency for International Development fund and support disaster preparedness and response services. The Office of Insular Affairs (a part of the US Department of the Interior) in partnership with the State Department provide assistance for telecommunications. The Federal Deposit Insurance Corporation extend deposit insurance to banks in the FAS.

The United States Department of Agriculture offers funding, services and eligibility in the FAS, including grants for Rural Utilities; Forestry Service & Programs; Mutual Self Help TA; Section 502 Housing; Section 504 Housing.

In addition to funding that comes through sector grants and the SEG, the United States Department of Education extends Special Education Grants and Talent Search / Upward Bound edibility into the FAS. Many economic development grants offered by the Department of Commerce are similarly open to individuals and institutions within the FAS.

Other US Federal agencies that either provide direct funding or services, or allow for funding and grant requests, include: the Department of Health and Human Services, the National Science Foundation, the US State Department and its Agency for International Development, the Library of Congress

The Office of Insular Affairs, with plays a major role in administering the Sector Grants, also oversees several additional direct assistance programs. These include grants through its Technical Assistance Program, Maintenance Assistance Program, Coral Reef Initiative, and Judicial Training Program. OIA also provides and oversees funding and technical assistance for government audits with the FAS.

Compact Trust Fund

During negotiation for a second phase of direct economic assistance, primarily in the form of sector grants, the additional mechanism of joint Trust Funds was introduced.

On one hand, the Trust Fund was, from the start, commonly characterized as a mechanism to fund economic assistance to the country at levels the same or above those in place at the end of the assistance period. On the other hand, even while the proposal was being developed, analysts and US officials calculated that the numbers and mechanisms could not achieve that goal. The position of the FAS, and particularly the FSM, has since been that the US officially viewed trust fund proceeds as one of several tools that would allow the FSM to arrive at “budgetary self-reliance” at the end of the amended Compact period. They argued this was a change from references to “self-sufficiency” used throughout the original Compact. For several years leading up to 2023 expiration of the second twenty years of assistance some in the US Government had pointed to the Trust Fund as justification for possibly not agreeing upon a third phase of assistance.

In fact, ahead of negotiations for post-2023 renewal of assistance, it was clear that the Trust Funds would not be able to provide sufficient and stable revenues of the sort that might have cleanly replaced sector grants. Even modeling reduced disbursements, additional contributions and a delayed start, there were additional problems in reconciliation of timelines of, and the procedures for, disbursements. Questions about original intent, and what could be done to possibly shore up the Trust Funds, were overshadowed by increasing US appreciation of the need for larger, closer and more vibrant ties with the FAS in the context of expanded threats to US interests in the Indo-Pacific.

Evolution of Assistance

For the FSM and RMI the first Compact Period (or "1986 Compact") began in Fiscal Year 1987 and lasted through 2003. This was followed by the 2003 Amended Compact Period from 2004 through 2023. ROP's Initial Compact Period extended from 1995 through 2009. Stopgap funding was provided from 2010 through 2017 and was fully authorized from 2018 to 2024.

Under the 2023 Amended Compacts, financial assistance was upgraded from discretionary annual appropriation to mandatory funding. That assistance, and US Federal programs eligibility, will continue indefinitely, with renegotiations scheduled every two decades. In total the Sector Grants, the heart of direct financial assistance, will provide $7.1 billion to the FSM and RMI to be distributed over a 20-year period.

Veterans’ health care services were authorized within the FAS, with travel costs available for reimbursement when health services are unavailable. Several programs seen in the first twenty years of COFA were reinstated, including Head Start, special educational services, and vocational education training.

FAS citizens, who have enjoyed access to Pell Grants, were offered in-state tuition at public colleges and universities. COFA Migrants living in the US are once again eligible for nutrition assistance and other federal assistance programs that had been closed to them in 1996.

The US also established an Interagency Group on Freely Associated States, to coordinate, implement and advise policy and practices across the US Government. Co-chaired by the Secretaries of the State Department and Department of the Interior, it will also include members from the Departments of Defense and Treasury.

Scale of Assistance

Analysis by the Asian Development Bank and the Graduate School USA indicates that late in the Amended Compact Period:

In the FSM, government accounted for 25% of the nation's total $402 million GDP. Compact Revenues comprised 23% of government revenues. US Federal programs provided a further 8 percent.

In the Marshalls, government accounted for 30% of the nation's total $240 million GDP. Compact Revenues comprised 34% of government revenues. US Federal programs provided a further 14 percent.

In Palau, government accounted for 28% of the nation's total $280 million GDP. Compact Revenues comprised 14% of government revenues. US Federal programs provided a further 12 percent.

US Defense Rights and Responsibilities

Palau, the Federated States, and the Marshall Islands do not have militaries, and resultantly incur no need for defense spending. The Compact specifies it is the responsibility of the United States to provide for the defense of these three FAS. Specifically, Palau, Micronesia and the Marshalls are treated as portions of the “US homeland,” the US being obliged to defend them on par with its own territory. To make this plausible, and in the pursuit of larger US strategic interests in the region, the United States is afforded the right to establish bases within these islands as well as the right to deny other military actors access to the islands.

Migration

The Compact affords citizens of the three FAS nations the right to travel to, and reside within, the United States and its territories. In the United States these citizens, often termed “COFA Migrants” if they remain for an extended period, enjoy nearly all the rights and responsibilities of native born or naturalized US citizens. It is now estimated the total number of FAS citizens in the US and its territories is nearly equal to the population totals within Palau, the Federated States, and the Marshall Islands. Surveys of these migrants consistently point to pursuit of educational, employment and healthcare opportunities as the primary drivers of migration.

Enlistment in US Military

Citizens from Palau, Micronesia and the Marshall Islands are able to enlist in the United States Military. They have done so at rates, calculated in proportion to populations of these islands, higher than rates of any of the fifty United States.