China Lurks as Congress Stalls on COFA Funding Approval

China Lurks as Congress Stalls on COFA Funding Approval

Without Washington’s commitment to funding the Compact of Free Association with Pacific Island nations, long-term regional confidence in the United States will erode.


America’s allies in the Pacific are getting nervous. Months ago, the United States government approved economic assistance agreements worth more than $7 billion with the Republic of the Marshall Islands (RMI), Palau, and the Federated States of Micronesia (FSM), which make up the Compact of Free Association (COFA) nations with whom the United States shares close relationships stemming from World War II.

Yet, Congress has to sign off on the funding. Its delay in doing so jeopardizes the United States’ credibility and commitment to its geopolitical backyard, pushing these states toward China for support. COFA supporters thought Congress would include funding in December’s National Defense Authorization Act (NDAA). However, fiscal hawks asked for “offsets,” meaning every dollar for the COFAs needed to be taken from elsewhere in the budget. No one on Capitol Hill nor various executive branch departments—Interior, State, or Defense—volunteered a solution. Additionally, an attempt to secure funding in the Senate’s Emergency Supplemental budget request in early February also failed.


The stakes for the Compact states, the United States, and their partners can hardly be higher. American Samoa’s representative in Congress, Amata Coleman Radewagan, has referred to COFA as “[o]ne of [the] most important tools that the United States has in supporting democracy and good governance while denying China the ability to project strategic power throughout the vast Pacific region.” Indeed, these unique relationships are the most critical agreements initiated supporting U.S. security over the last fifty years.

Under the Compact agreements, the three Pacific nations provide a secure east-west corridor between U.S. treaty allies, the Philippines and Hawaii. The United States must defend the three nations and can veto military and strategic access to territory by third countries. It may build military facilities—such as a ballistic missile defense test site in RMI and an early-warning radar installation in Palau—and conduct military exercises in the Compact states. One analyst has testified to Congress that without the Compact agreements, the cost of securing the exact 5.6 million square kilometers with ships, planes, and submarines would be $100 billion a year compared to the budget dust of a few million dollars a year, or “literally a day’s worth of Medicare fraud,” with the COFAs.

The Compact states get financial and service support from the United States for education, healthcare, and infrastructure maintenance to advance economic development and self-sufficiency. Their citizens can live, work, and study in the United States as visa-free non-immigrants and serve in the U.S. armed services; they even have U.S. postal codes.

To prompt Congress to make good on the government’s promises, RMI president Hilde Heine has stressed Beijing’s “carrot and stick efforts…to shift alliances” and said the blockage “threatens to undermine confidence in the U.S. and to encourage some to agree to PRC enticements.”

President Surangel Whipps of Palau has revealed that Beijing has already offered to “fill every hotel room” in his country and provide $20 million a year for two acres of land to build a call center.

Rumors have circulated that China is prepared to offer more funding than the United States for similar pacts. This could allow Beijing to base missiles and station warships in the Pacific “second island chain.” Indeed, Chinese influence operations in the Compact states are systematic and increasing, as former FSM president David Panuelo described in detail.

Moreover, Palau and RMI are among the dozen countries that still recognize Taiwan and face continual pressure to switch diplomatic recognition to China, as Pacific neighbors Kiribati and Nauru have already done. President Whipps of Palau warned the United States in a letter on February 9 that the delay was playing into the hands of China, and politicians in Palau wanted to accept Chinese economic inducements to cut diplomatic ties with Taiwan. With an election scheduled for November 12, it’s possible that this switch could occur before the end of the year.

The Compact agreements do not prevent these archipelagic nations from pursuing diplomatic partnerships. A change in diplomatic recognition is the sovereign right of any nation. However, while other Pacific Island countries generally reject picking a side or otherwise taking part in U.S.-China competition, these three FAS states have decided their security lies with the United States by renewing their Compact agreements.

Without implementing the Compacts—which were signed in May and October 2023—Palau, FSM, and RMI have limited options to respond to Chinese encroachments and overtures. 

President Whipps has been vocal about the pressures his country has faced. In May last year, after a Chinese research vessel entered Palau’s waters without permission, Whipps announced that it was the fourth such unwanted incursion by Chinese ships into Palau’s Exclusive Economic Zone since 2018.

Palau was also subjected to economic coercion in 2017 when Beijing blocked Chinese tourism in a bid to bully Palau into cutting ties with Taiwan. The previous annual flow of tens of thousands of Chinese tourists abruptly dried up. The Pacific country appreciated the environmental relief that came with a drop in Chinese visitors but struggled to recoup the financial losses.

A complete switch in the three countries’ security partnerships is unlikely. However, the leaders of these nations have made it clear that China is seeking to exploit this inaction by the United States to advance its geostrategic interests in the region. These governments depend on the reliable income set by the agreements. Without the funds, the essential operations of their governments and institutions are likely to be hindered. Palau, for example, is facing a $37 million budget shortfall, which means the government could be forced to cut pensions and welfare services.

Assuming Congress eventually approves the twenty-year funding packages, it will only partially unearth the seeds of doubt about U.S. reliability that have been sown across the region. Other Pacific Island states view COFA as a test of the United States’ commitment to the area. Understandably, countries will consider diversifying their partnerships and options if renegotiating the agreements in the 2040s is still challenging.

The long-term implications of an increased PRC presence could lead to more significant coercive political pressure on democratic institutions, such as attempts to obstruct the publication of articles in a free press, which has happened in other Pacific island countries.

The Chinese Communist Party could again employ coercive tactics—and if the Pacific is more hesitant to rely on the United States, the outcome becomes less certain. A brief letter to Congress in support of COFA by the Australian and New Zealand ambassadors warns of “severe consequences” and pressures on the Compact states to “look for sources of funding that they believe are more reliable.” Neither Australia nor any other partners could match the United States. However, they will continue to support Pacific priorities such as economic growth, security, and climate resilience in these small island nations.

The needless delay has shaken confidence, but Congress will have another opportunity to prove that the United States is a Pacific country sharing interests with other Pacific peoples. A new funding bill released on March 3 and scheduled for a vote this week includes COFA funding. It’s now a numbers game. Forty-eight bipartisan House members told Speaker Johnson that “failing to ratify these agreements negotiated in good faith would be the most self-destructive gift the United States could give the PRC in the Pacific.” Twenty-six Senators from both parties have implored the Senate leadership to support COFA “in any legislative vehicle” or risk jeopardizing relationships with the “entire Pacific Island region.”

Each day, without a commitment to the Compact agreement funding, long-term confidence in the United States is undermined. Washington must find a way to get congressional approval as soon as possible.

Blake Johnson is a senior analyst at the Australian Strategic Policy Institute in Canberra.

Dr. Greg Brown is a senior analyst at the Australian Strategic Policy Institute Washington, DC office.

Image: Bill Chizek /