US budget fight could create opening for China in the Pacific
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[October 05, 2023]
By David Brunnstrom
WASHINGTON (Reuters) - A 45-day stopgap measure passed by the U.S.
Congress to avert a government shutdown has left potential funding
shortfalls for strategic Pacific island states, which analysts and
former officials say makes the U.S. allies economically vulnerable and
possibly more receptive to Chinese approaches.
The Biden administration had hoped to see Congress endorse by Sept. 30
new 20-year funding programs for Micronesia, the Marshall Islands and
Palau, which after decades of relative neglect now find themselves at
the center of a U.S. battle for influence with China in the Northern
Pacific.
The sprawling but sparsely populated nations have ties with the U.S.
governed by so-called Compacts of Free Association (COFAs), under which
Washington is responsible for their defense and provides economic
assistance, while gaining exclusive military access to strategic swathes
of ocean.
The funding programs for the Marshall Islands and Micronesia were due
for renewal by Sept. 30, and by the end of fiscal 2024 for Palau, and
Washington agreed this year on a new package of $7.1 billion over 20
years, subject to Congressional approval.
The stopgap "continuing resolution" (CR) that prevented a federal
government shutdown does not include approval for this new program,
however, and while it maintains federal services to the COFA states, it
leaves holes in other parts of their budgets.
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"While keeping the services going is an important assurance, the CR will
make things quite difficult in the Marshalls (which has an election on
November 20) and Palau (election next year)," said Cleo Paskal, an
expert on the COFA states with the Foundation for Defense of Democracies
think tank.
"Both are countries that recognize Taiwan and are key components of U.S.
defense architecture in the Pacific," she said. "Watch for increased
(Chinese) political warfare spin around the U.S. being an unreliable
partner."
Paskal said Palau's funding under its existing COFA had dwindled as it
approached its final year and it had been banking on funds from the new
package to help cover budget deficits.
Paskal said Palau's economy had already taken bad hits from COVID-19 and
Chinese economic interference aimed at pressuring it to switch
diplomatic recognition from U.S.-backed Taiwan to Beijing.
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![](../images/100523PIX/news_z13.jpg)
U.S. President Joe Biden speaks as he poses with Federated States of
Micronesia's President David Panuelo, Fiji's Prime Minister Frank
Bainimarama, Solomon Islands Prime Minister Manasseh Sogavare and
Papua New Guinea's Prime Minister James Marape and other leaders
from the U.S.- Pacific Island Country Summit, at the White House in
Washington, U.S. September 29, 2022. REUTERS/Jonathan Ernst/File
Photo
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There is no new money so far too for the Marshall Islands, which has
yet to finalize new terms with Washington due to disagreements over
how to address the legacy of massive U.S. nuclear testing there in
the 1940s and 1950s.
Meanwhile, China is waiting in the wings with ready cash.
Roll Call, a news site covering the U.S. Congress, noted last week
that Palau's Finance Minister Kaleb Udui told a congressional field
hearing in August that Beijing had been trying to tempt locals to
oppose U.S. plans to build an early-warning radar by offering to
build a hotel and casino nearby.
The Washington embassies of Palau and the Marshall islands did not
immediately respond to requests for comment.
The Biden administration has made renewing the COFAs a priority, and
it has broad bipartisan support, but congressional infighting is not
the only hurdle.
Howard Hills, a senior adviser to the U.S. COFA negotiating team
from 2020 until retiring last month, blamed the Marshall Islands
holdup on U.S. State Department lawyers who wanted to control how
new funds were spent and objected to them being earmarked to address
the nuclear legacy, fearing this could lay the U.S. open to more
claims.
Asked to comment, the State Department said Washington was "working
expeditiously to finalize negotiations" with the Marshall Islands
and had had constructive conversations to that end "including at the
Presidential level" at last week's U.S.-Pacific Islands Forum
Summit.
(Reporting by David Brunnstrom; Editing by Don Durfee and Josie Kao)
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