Updated August 25, 2023
The Compacts of Free Association
Overview
FY2024 for Palau. Compact provisions related to defense,
The Compacts of Free Association govern the relationships
security, migration, and other areas are to continue
between the United States and the Republic of the Marshall
unchanged. The Department of the Interior (DOI) has
Islands (RMI), Federated States of Micronesia (FSM), and
funded and administered this assistance, also referred to as
Republic of Palau. The Marshall Islands, Micronesia, Palau,
grant assistance, through mandatory or permanent
and the Northern Mariana Islands were districts of the
appropriations since the Compacts’ inception. The FAS also
former U.S.-administered United Nations Trust Territory of
are eligible for some U.S. federal programs and services.
the Pacific Islands, established after World War II, and later
became sovereign countries in “free association†with the
U.S.-FAS negotiations to renew Compact economic
United States. The Compacts grant the United States the
assistance began in 2020. Since March 2022, Ambassador
prerogative to operate military bases in the RMI, FSM, and
Joseph Yun, the State Department’s Special Envoy for
Palau (known collectively as the Freely Associated States,
Compact Negotiations, has led talks on the U.S. side. In
or FAS) and make decisions related to their external
January and February of 2023, the United States signed
security, and they entitle the FAS to U.S. security
memoranda of understanding (MOUs) with each of the
guarantees and economic assistance.
three FAS on the basic levels and types of Compact
assistance for the next 20 years. In May 2023, the United
Citizens of the FAS have the right to reside and work in the
States signed agreements with the FSM and Palau on
United States and its territories as lawful non-immigrants or
extending economic assistance. A final U.S.-RMI
“habitual residents.†More than 94,000 FAS citizens live in
agreement has not been reached at the time of this writing.
the United States, including children under age 18 who
In June 2023, the Department of State submitted a draft bill
were born in the United States and hold dual citizenship.
(joint resolution) to Congress that if approved would amend
The FAS do not have their own militaries, and FAS citizens
the Compacts and implement the FSM and Palau
are eligible to join the U.S. military; over 1,000 FAS
agreements and the pending agreement with the RMI. The
citizens serve in the U.S. Armed Forces.
agreements include grant assistance and trust fund
contributions for the FSM and Palau that total $3.3 billion
The FAS cover a maritime area larger than the continental
and $0.9 billion, respectively, for FY2024-FY2043. In
United States, govern over 1,000 islands and atolls, and
addition, the agreements include $634 million to continue
have a combined population of approximately 200,000. The
the U.S. Postal Service in the FAS. The U.S.-RMI MOU
FAS economies face structural challenges similar to many
provides for assistance totaling $2.3 billion for 20 years,
other Pacific Island counties (PICs), including lack of
including a $700 million trust fund intended for various
economies of scale, small land areas, limited natural and
purposes, including for addressing nuclear legacy issues.
human resources, remote locations, poor infrastructure, and
The next phase of Compact assistance to the FAS is to
vulnerability to climate change. The RMI, FSM, and Palau
include greater support for the environment, climate change
rank 162nd, 192nd, and 118th, respectively, out of 229
adaptation, health care, education, and infrastructure.
countries by gross domestic product per capita.
Figure 1. The Freely Associated States
Located roughly 2,500 miles southwest of Hawaii, the FAS
play a role in supporting the U.S. security presence in the
Pacific Islands region at a time of increasing strategic
competition between the United States and its allies, on one
hand, and the People’s Republic of China (PRC), on the
other. The Biden Administration’s 2022 Indo-Pacific
Strategy refers to the Compacts of Free Association as “the
bedrock of the U.S. role in the Pacific.†The RMI and Palau
are among four PICs that have diplomatic relations with
Taiwan and not the PRC. Micronesia, along with some
other PICs, rejected a 2022 PRC proposal for a sweeping
diplomatic, economic, and security pact between China and
10 PICs with which China has diplomatic relations.
Compact Negotiations
Source: CRS. Information from Esri and U.S. Department of State.
Economic assistance pursuant to Title II of the Compacts of
Free Association is set to expire at the end of FY2023 for
the Marshall Islands and Micronesia and at the end of
Compensation for past nuclear testing remains a sticking
point in U.S.-RMI negotiations to finalize an agreement on
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The Compacts of Free Association
extending Compact assistance. From 1946 to 1958, the
Economic assistance pursuant to the 2010 CRA amounted
United States conducted 67 atmospheric atomic and
to $229 million.
thermonuclear weapons tests over the Marshall Islands
atolls of Bikini and Enewetak. Since the nuclear testing
U.S. Security Presence
program ended, the U.S. government has provided, by some
The United States maintains a dominant security presence
estimates, roughly $600 million for damages,
in the Micronesian subregion of the Southwest Pacific,
environmental cleanup and restoration, resettlement, and
where the FAS as well as Guam and the Commonwealth of
health and medical programs. The RMI claims roughly $3
the Northern Mariana Islands are located. In addition to air
billion in uncompensated damages.
and naval bases on Guam, the U.S. military operates the
Ronald Reagan Ballistic Missile Defense Test Site (RTS) at
Compact History
U.S. Army Garrison-Kwajalein Atoll in the Marshall
In 1975, the Northern Mariana Islands chose
Islands. The amended Compact of 2003 extended U.S. base
commonwealth status, and in 1978, the Marshall Islands,
rights on Kwajalein Atoll through 2066, with the U.S.
Micronesia, and Palau rejected the option of U.S.
option to continue the arrangement for an additional 20
commonwealth or territorial status and chose free
years. The U.S. military is building a high-frequency radar
association with the United States. The governments of the
system in Palau. In 2021, the U.S. and FSM governments
Marshall Islands and Micronesia signed Compacts of Free
agreed to establish a U.S. military facility in Micronesia.
Association with the United States in 1982. The Compacts
were approved by plebiscites in the Marshall Islands and
Congressional Oversight
Micronesia and by the U.S. Congress in 1985 (P.L. 99-239),
Key issues that Congress may consider related to the
becoming effective in 1986 (with economic assistance
renewal of Compact assistance include changes to oversight
beginning in FY1987). The 50-year U.S.-Palau Compact of
mechanisms; the possible reestablishment of an Office of
Free Association was approved by Congress in 1986 and
FAS Affairs and/or an Interagency Group on the FAS
1989 (P.L. 99-658 and P.L. 101-219) and ratified in Palau
located in the State Department; and possible increased
in 1993 (entering into force in 1994, with economic
support to FAS communities that serve U.S. military
assistance beginning in FY1995). Each Compact provided
facilities, such as the roughly 900 residents of the RMI
for economic assistance for an initial period of 15 years.
island of Ebeye who work at RTS. Congress also may
consider policy options related to federal assistance for FAS
The first term of economic assistance under the RMI and
migrants living in U.S. states and territories.
FSM Compacts formally expired in FY2001. In 2003, the
United States and the RMI and FSM signed agreements to
The 118th Congress has held the following hearings focused
renew Compact assistance, and Congress passed legislation
on the FAS: Indian and Insular Affairs Subcommittee of the
(P.L. 108-188) amending the Compacts and extending
House Committee on Natural Resources, Preserving U.S.
economic assistance for 20 years (FY2004-FY2023). New
Interests in the Indo-Pacific: Examining How U.S.
features of the assistance included trust funds, joint
Engagement Counters Chinese Influence in the Region
oversight committees, and sector grants targeting education,
(May 16, 2023); House Committee on Natural Resources,
health, the environment, public sector capacity building,
Indo-Pacific Task Force, How the Compacts of Free
private sector development, and infrastructure. In 2010, the
Association Support U.S. Interests and Counter the PRC’s
United States and Palau concluded the U.S.-Palau Compact
Influence (June 14, 2023); Senate Committee on Energy
Review Agreement (CRA), to extend economic assistance
and Natural Resources, Full Committee Hearing to Receive
and trust fund contributions through FY2024. Although the
Testimony Regarding the Compact of Free Association
U.S. government continued to make annual assistance
Amendments Act of 2023 (July 13, 2023); House Committee
available to Palau after 2009, Congress did not authorize
on Natural Resources, Indo-Pacific Task Force, The Biden
full funding pursuant to the CRA until FY2018 (P.L. 115-
Administration’s Proposed Compact of Free Association
91 and P.L. 115-141).
Amendments Act of 2023 (July 18, 2023).
Compact Assistance Numbers
The National Defense Authorization Act, FY2022 (NDAA;
Compact assistance to the FAS (232 million in FY2023)
P.L. 117-81) states that the Secretary of Defense should
has amounted to roughly 80% of all U.S. assistance to the
engage with the FAS “with the goal of strengthening
Pacific Islands region, according to some estimates. As
regional security and addressing issues of mutual concern,
reported by DOI, pursuant to the Compacts, the United
including protecting fisheries from illegal, unreported, and
States provided grant assistance worth $690 million to the
unregulated fishing†(§1252) and mandates a study on the
RMI and $1.54 billion to the FSM between FY1987 and
Runit Dome nuclear waste site in the RMI (§3140). The
FY2003. During the second Compact term (FY2004-
FY2023 NDAA (P.L. 117-263) includes provisions (§5591)
FY2023), U.S. grant assistance and trust fund contributions
emphasizing the importance of the Compacts for U.S.
to the RMI totaled $722 million and $276 million,
national security and of renewing economic assistance to
respectively. The FSM received $1.6 billion in grant
the FAS for regional security.
assistance and $517 million in trust fund contributions
during the same period. In addition, U.S. payments to the
For further information, see CRS Report R46573, The
RMI for the military use of Kwajalein Atoll amounted to
Freely Associated States and Issues for Congress.
$412 million (1987-2023). Between FY1995 and FY2009,
Compact assistance to Palau, including grant assistance,
Thomas Lum, Specialist in Asian Affairs
road construction, and a trust fund, totaled $574 million.
IF12194
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The Compacts of Free Association
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