Compacts of Free Association: an Assessment of Current Us Proposals to Extend Assistance
Westin, Susan (2002). Compacts of Free Association: an Assessment of Current Us Proposals to Extend Assistance (Report). Washington, DC: Government Accountability Office. p. 11.
- Has attachment: File:CXQDWMWQ.pdf
Abstract: ...
which consists of separate international agreements with each country, has provided U.S. assistance to the FSM and the RMI in the form of direct funding as well as federal services and programs for more than 15 years. Further, the Compact allows for migration from both countries to the United States and establishes U.S. defense rights and obligations in the region. Provisions of the Compact that deal with economic assistance were scheduled to expire in 2001; however, they will remain in effect for up to 2 additional years while the United States and each nation renegotiate the affected provisions. 2 Today I will discuss our review of the current U.S. proposals to extend economic assistance to the FSM and the RMI. Specifically, I will discuss the potential cost of assistance to the U.S. government, the amount of per capita assistance for the FSM and the RMI, and the projected earnings of proposed trust funds. Further, I will identify accountability measures that are in the proposals and discuss whether the proposals address past GAO recommendations in this area. It is worth emphasizing that all of the above issues are still under negotiation, and therefore final Compact assistance levels and accountability measures could differ from those I will discuss today. Current U.S. proposals to the FSM and the RMI to renew expiring assistance would require the Congress to approve about $3.4 billion in new authorizations. 3 The proposals would provide decreasing levels of annual 1 The FSM had a population of about 107,000 in 2000, while the RMI had a population of 50,840 in 1999, according to each country's most recent census. 2 Other Compact provisions are also due to expire in 2003 if not renegotiated and approved. These include (1) certain defense provisions, such as the requirement that the FSM and the RMI refrain from actions that the United States determines are incompatible with U.S. defense obligations (defense veto); and (2) federal services listed in the Compact. 3 Our analysis is based on U.S. proposals submitted to the FSM and the RMI governments in grant assistance over a 20-year term (2004 through 2023). Simultaneously, the proposals would require building up a trust fund for each country with earnings that would replace grants once those grants expire. Per capita grant assistance would fall during the term of Compact assistance, particularly for the RMI. At the Department of State's assumed trust fund rate of return (6 percent), the RMI trust fund would cover expiring assistance at the 2023 level, while the FSM trust fund would not achieve this goal. Further, at this rate of return, neither trust fund would build up buffer funds that could be used during years of low or negative trust fund earnings. The U.S. proposals include strengthened accountability measures, though details of some key measures remain unknown. The proposals have addressed many, but not all, recommendations that we have made in our past reports regarding assistance accountability. For example, proposals call for grant terms and conditions and eliminate a pledge of "full faith and credit" for funds. Proposals also allow for the withholding of funds and give the United States control over the annual consultation process and trust fund management.
