Updated March 17, 2023
The Compacts of Free Association
Overview
Department of the Interior (DOI). The FAS are also eligible
The Compacts of Free Association govern the relationships
for some U.S. federal programs and services.
between the United States and the Republic of the Marshall
Islands (RMI), Federated States of Micronesia (FSM), and
The United States, led by Special Envoy for Compact
Republic of Palau. The Marshall Islands, Micronesia, and
Negotiations Joseph Yun, and each of the FAS aim to
Palau were districts of the former U.S.-administered United
complete bilateral negotiations to renew economic
Nations Trust Territory of the Pacific Islands, established
assistance by May 2023. U.S. negotiating teams have
after World War II, and later became sovereign countries in
included officials from the Departments of State, the
“free association” with the United States. The Compacts
Interior, and Defense. Once negotiators reach bilateral
grant the United States the prerogative to operate military
agreements to extend Compact assistance, the President is
bases in the RMI, FSM, and Palau (known collectively as
to submit draft legislation to Congress and both houses of
the Freely Associated States, or FAS) and make decisions
Congress are to approve them through implementing
related to their external security, and they entitle the FAS to
legislation. In January and February 2023, the United States
U.S. security guarantees and economic assistance.
signed memoranda of understanding with all three Compact
countries on the basic levels and types of Compact
Citizens of the FAS have the right to reside and work in the
assistance for the next 20 years.
United States and its territories as lawful non-immigrants or
“habitual residents.” More than 94,000 FAS citizens live in
Figure 1. The Freely Associated States
the United States, including children under age 18 who
were born in the United States and hold dual citizenship.
The FAS do not have their own militaries, and FAS citizens
are eligible to join the U.S. military; several hundred FAS
citizens currently serve in the U.S. Armed Forces.
The three Compact countries cover a maritime area larger
than the continental United States, govern over 1,000
islands and atolls, and have a combined population of
approximately 200,000. The FAS economies face structural
challenges similar to many other Pacific Island counties
(PICs), including lack of economies of scale, small land
areas, limited natural and human resources, remote

locations, poor infrastructure, and vulnerability to climate
Sources: CRS. Information from Esri and U.S. Department of State.
change. The Marshall Islands, Micronesia, and Palau rank

163rd, 193rd, and 119th, respectively, out of 229 countries by
Compact History
gross domestic product per capita.
The Marshall Islands, Micronesia, and Palau signed
Compacts of Free Association with the United States in
Located roughly 2,500 miles southwest of Hawaii, the FAS
1982. The Compacts were approved by plebiscites in the
play a role in supporting the U.S. security presence in the
Marshall Islands and Micronesia and by the U.S. Congress
Pacific Islands region at a time of increasing strategic
in 1985 (P.L. 99-239), becoming effective in 1986. In 1986,
competition between the United States and its allies, on one
hand, and the People’s Republic of China (PRC)
Palau and the United States signed a 50-year Compact of
, on the
Free Association. The Palau Compact was approved by
other. The Biden Administration’s Indo-Pacific Strategy,
Congress (P.L. 99-658 and P.L. 101-219), but not ratified in
released in February 2022, articulates U.S. goals in the
Palau until 1993 (entering into force in 1994, with U.S.
Pacific Islands region, and refers to the Compacts of Free
assistance beginning in 1995). Each Compact included
Association as “the bedrock of the U.S. role in the Pacific.”
economic assistance that would expire after 15 years.
Compact Negotiations
Although negotiations to renew the economic assistance
Economic assistance pursuant to Title II of the Compacts of
provisions of the Compacts between the United States and
Free Association is set to expire at the end of FY2023 for
the RMI and FSM were not completed before the end of the
the Marshall Islands and Micronesia and at the end of
first Compact term (1986-2001), grant assistance continued
FY2024 for Palau. Compact provisions related to defense,
while negotiations went on. Following the completion of
security, migration, and other areas are to continue
negotiations in 2003, Congress approved the agreements
unchanged. Such assistance, also referred to as grant
(P.L. 108-188), amending the Compacts and extending
assistance, is currently funded and administered through the
assistance for another 20 years (2004-2023). Two new
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The Compacts of Free Association
features of the assistance were trust funds established with
environmental cleanup and restoration, resettlement, and
the aim of providing sustainable sources of revenue after
health and medical programs. The RMI claims over $2.2
2023 and oversight committees with members from the
billion in uncompensated damages.
U.S. and FAS governments. In 2010, the United States and
Palau concluded the U.S.-Palau Compact Review
U.S. Security Presence
Agreement, to extend economic assistance and trust fund
The United States maintains a dominant security presence
contributions through 2024. Although the U.S. government
in the Micronesian subregion of the Southwest Pacific,
continued to provide annual grant assistance to Palau after
where the FAS as well as Guam and the Commonwealth of
2009, Congress did not authorize full funding pursuant to
the Northern Mariana Islands are located. In addition to air
the agreement until 2018 (P.L. 115-91 and P.L. 115-141).
and naval bases on Guam, the U.S. military operates the
Ronald Reagan Ballistic Missile Defense Test Site (RTS) at
Compact Assistance
U.S. Army Garrison-Kwajalein Atoll in the Marshall
Compact assistance to the FAS has amounted to roughly
Islands. The amended Compact of 2003 extended U.S. base
80% of all U.S. assistance to the Pacific Islands region,
rights on Kwajalein Atoll through 2066, with the U.S.
according to some estimates. Pursuant to the Compacts, the
option to continue the arrangement for an additional 20
United States provided grant assistance worth
years. The Department of Defense is building a high-
approximately $661 million to the Marshall Islands and
frequency radar system in Palau. In 2021, the U.S. and FSM
$1.54 billion to Micronesia between 1987 and 2003. During
governments agreed to establish a U.S. military facility in
the second Compact term (2004-2023), U.S. grant
Micronesia.
assistance and trust fund contributions to the Marshall
Islands totaled $722 million and $276 million, respectively.
Congressional Considerations
Micronesia received $1.6 billion in grant assistance and
Key issues that Congress may consider related to Compact
$517 million in trust fund contributions during the same
assistance renewal include the following: changes to
period. According to the Government Accountability
oversight mechanisms during the next Compact term; the
Office, total Compact-related assistance during the second
possible reestablishment of an interagency working group
term totaled $3.6 billion for the two countries, targeting six
on the FAS; and possible increased support to FAS
sectors: education, health, the environment, public sector
communities that serve U.S. military facilities, such as the
capacity building, private sector development, and
roughly 900 residents of the RMI island of Ebeye who work
infrastructure. Between 1995 and 2009, Compact assistance
at RTS. Congress also may consider policy options related
to Palau, including grant assistance, road construction, and
to federal assistance for FAS migrants living in U.S. states
the establishment of a trust fund, totaled $574 million.
and territories
Economic assistance pursuant to the 2010 Compact Review
agreement is to total $229 million. In FY2023, DOI
The 116th and 117th Congresses held four hearings on the
provided $232 million in Compact assistance to the FAS.
FAS: Senate Committee on Energy and Natural Resources,
Full Committee Hearing on the Freely Associated States
Other major contributors of assistance to the FAS are Japan,
(March 29, 2022); Oversight and Investigations
China, Australia, and Taiwan. The Marshall Islands and
Subcommittee of the House Committee on Natural
Palau are among four PICs that have diplomatic relations
Resources, Runit Dome and the U.S. Nuclear Legacy in the
with Taiwan and not the PRC. Micronesia, along with some
Marshall Islands (October 21, 2021); House Foreign
other PICs, rejected a 2022 PRC proposal for a sweeping
Affairs Committee and Committee on Natural Resources,
diplomatic, economic, and security pact between China and
Sustaining U.S. Pacific Insular Relationships (September
10 PICs with which China has diplomatic relations.
26, 2019); and Senate Committee on Energy and Natural
Resources, Hearing on U.S. Interests in the Freely
FY2024 Budget Request
Associated States (July 23, 2019).
The President’s international affairs budget request for
FY2024 includes a total of $7.1 billion in mandatory budget
The National Defense Authorization Act, FY2022 (NDAA;
authority for the Compacts of Free Association, including
P.L. 117-81) states that the Secretary of Defense should
$6.5 billion in Compact economic assistance (including
engage with the FAS “with the goal of strengthening
trust fund contributions) and $634 million to extend U.S.
regional security and addressing issues of mutual concern,
Postal Service services in the FAS for 20 years (FY2024-
including protecting fisheries from illegal, unreported, and
FY2043). The request for Compact funding to fulfill the
unregulated fishing” (§1252) and mandates a study on the
pending renewal agreements is part of a larger State
Runit Dome nuclear waste site in the RMI (§3140). The
Department “Out-Compete China” mandatory budget
FY2023 NDAA (P.L. 117-263) includes provisions (§5591)
authority for FY2024. Under the proposed arrangement,
emphasizing the importance of the Compacts for U.S.
DOI would continue to administer Compact assistance but
national security and of renewing economic assistance to
would no longer be required to provide funding. According
the FAS for regional security.
to reports, the next phase of Compact assistance is to
include greater support for environmental programs and
For further information, see CRS Report R46573, The
climate change adaptation, health care and education, and
Freely Associated States and Issues for Congress, and CRS
addressing nuclear legacy issues in the Marshall Islands.
In Focus IF11208, The Pacific Islands.
Since nuclear testing over the Marshall Islands ended in
1958, the U.S. government has provided, by some
Thomas Lum, Specialist in Asian Affairs
estimates, roughly $600 million for damages,
IF12194
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The Compacts of Free Association


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