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Ties That Bind: Compact Agreement Between Palau and US

Renita Brooks, RN, BSN - 1/18/2005

As the heads of CBS begin to market their new version of its hit TV series "Survivor," I thought it may be interesting to explore this tiny island community's political background and investigate its history, in particular its ties to the U.S. Many mainlanders are unaware of the political and social backgrounds of countries we have free-hold pacts with, the nation of Palau being just one.

According to any number of encyclopedias on the subject, Palau is a group of small islands that form a nation in the North Pacific not far from the Philippines, though it is closer to Guam. Although it is an incredibly young nation that has only recently gained its independence from these United States, scientists have traced the first known settlers to before 1000 A.D.

The political history of Palau is filled with brutality and death - from the control of both Spain and Germany, till its occupation of Japan and even up till the late 1980's, when the United States had taken over, two of its rulers were either assassinated or committed suicide. The United States had taken control over the island from Japan after World War II. The U.S. eventually took over the Philippines and other areas that formed the Marshall Islands. It kept a U.N. trusteeship in place until it eventually began the process of cutting most, but not all, of its ties to the burgeoning country.

According to the CIA's World Factbook, the official title of the country is the "Republic of Palau." Even though a democratic system of government was first introduced to it by the occupation of the government of the United States, upon its independence, the ruling body felt that such a system must be maintained. Without this agreement the United States would not have accepted the pact and the island would have been vulnerable to a communistic or socialistic system of Asian rule. Because of that threat, and according to the CIA, the island has kept a formal Compact of Free Association with the United States mainly for security and other defensive purposes. This idea was originally brought to the table in 1986 by Congress between it and the collective Marshall Islands, and a separate agreement between it and the island nation of Palau. The islands were made a sovereign nation officially during President Bill Clinton's term in 1994.

Also, according to the Economic Report of the Republic of Palau published by the Bank of Hawaii in 2003, The Republic of Palau will receive $627 million dollars over the course of 15 years as a form of "rent" for waterways and other land that is freely used by the United States. What is not well known, and also according to the Bank of Hawaii's published report, is that the island nation is only allowed to use the funds in ways that have been approved by Congress prior to entering into the pact. It should also be noted that the Compact is only for the duration of 50 years, and both parties have the opportunity to either renegotiate or to completely end the pact.

The Compact of Free Association is a bit controversial in its own right. The United States of America holds free rights and obligations with regard to the nation's security and/or defense. Although this provision will be discussed in greater detail further in the article, what is quite clear is that not even the nation itself has the ability to supercede the authority of this provision. The United States has the free use of portions of the islands for missile testing and other related activities that are solely for the benefit of the United States. This type of use, according to Dr. John Fairlamb of the United States State Department, in an article first published in 2001 and presented to the Island State Security Conference Asia-Pacific Center for Security Studies, has occurred since the Compact was first negotiated back in 1986.

To be fair, the article points out that the Compact of Free Association was first entered into during the Cold War and Asian influence in that territory was beginning to increase at a dramatic rate. It was not only in the U.S.'s best interest to boost its presence in that area, but also for the tiny islands as well. Also, a large part of the economic policies that were part of the agreement had also included a timetable of discontinued financial support by the United States and an increase in revenue from investments and interest as a result of the original disbursement.

During the renegotiations of the Compact beginning in 2001 and ratified in 2003, the two parties agreed on a trust fund. According to Sections 216 and 217 of the amended ratification of the Compact signed in April of 2003, the trust fund will continue to provide the nation with funds after the year 2023; at which time the nation will, presumably, be self-sufficient and will no longer depend on disbursements from the United States with regard to its financial needs. Certain tax breaks and other incentives were amended to include under Title II: Economic Relations, Article I, Grant Assistance, Section 211, "In order to assist the Government of Palau in its efforts to advance the well-being of the people of Palau and in recognition of the special relationship that exists between the United States and Palau, the Government of the United States shall provide to the Government of Palau on a grant basis…" a total of $103 million dollars for various programs that include health, education, communications and administrative operations. $70 million of this fund is be used expressly "to create a fund to be invested by the Government of Palau in issues of bonds, notes or other redeemable instruments of the Government of the United States or other qualified instruments which may be identified by mutual agreement of the Government of the United States and the Government of Palau." These funds are free of tax and can only be spent, managed or invested in a way that both the Government of the United States and The Republic of Palau mutually agree upon for fifty years after the commencement of the agreement. The objective of this sum is to produce an average annual distribution of $15 million commencing on the fifteenth anniversary of this Compact for thirty-five years. Any excess or variance from the agreed minimum annual distributions which may be produced from these sums shall accrue to or be absorbed by the Government of Palau unless otherwise mutually agreed in accordance with the provisions of the separate agreement referred to in this paragraph. The annual distributions produced from these sums are not subject to Sections 215 and 236 of the Act.

In this instance, it is important to know exactly what the United States Government is receiving in exchange for all its generosity. Under Title III: Security and Defense Relations, Article I: Authority and Responsibility, section 311 and 312 "The territorial jurisdiction of the Republic of Palau shall be completely foreclosed to the military forces and personnel or for the military purposes of any national except the United States of America," and "the Government of the United States may conduct within the lands, water and airspace of Palau the activities and operations necessary for the exercise of its authority and responsibility under this Title. The Government of the United States may invite the armed forces of other nations to use military areas and facilities in Palau in conjunction with and under the control of United States Armed Forces." There are no provisions that state Palau has the ability or authority to supercede this provision in any way. In fact, under Section 313 of that same Title and Article, "The Government of Palau shall refrain from actions which the Government of the United States determines, after consultation with that Government, to be incompatible with its authority and responsibility for security and defense matters in or relating to Palau." Even more damaging, under section 324, the Government of the United States, "has the right to operate nuclear capable or nuclear propelled vessels and aircraft within the jurisdiction of Palau without either confirming or denying the presence or absence of such weapons within the jurisdiction of Palau." This goes directly in the face of Palau's history of being totally "nuclear-free," even though the same section states that the U.S. will not test, use or store any nuclear powered weaponry.

It is clearly understood within this agreement that both parties have the ability to renegotiate at any time; however, it is apparent who really has the larger bargaining means.

Palau has become a democratic republic with directly elected executive and legislative branches. Presidential elections take place every four years to select the president and the vice president, who run on separate tickets. The Palau National Congress (Olbiil era Kelulau) has two houses. The Senate has nine members elected nationwide. The House of Delegates has 16 members, one each from Palau's 16 states. All of the legislators serve four-year terms. Each state also elects its own governor and legislature. There is an "advising" body made of delegate chiefs, one from each state. They are to ensure that traditional laws and customs are upheld. The nation has maintained a constitution since 1981.

Beyond security and economic issues, the true benefit to Palau as a result of the Compact is the understanding that the nation is a "free" nation enjoying all of the rights and benefits thereof. It remains to be seen if, in fact, the islands are a sovereign nation and will be able to flourish in a way that is most beneficial to its citizens. With the United States Government holding many of the cards at this point, we can only hope that the nation of Palau can fully begin to obtain the independence it has not only deserved historically, but has also deserved respectfully. With any luck, they will, indeed, be the lone survivor.