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FSM Secretary of Economic Affairs Testifies on Compact of Free Association before Senate Energy Committee Hearing

WASHINGTON, D.C. (FSM Embassy to the US): July 16, 2003 - The US and FSM face an "important juncture in the special relationship between our nations," states Secretary Sebastian Anefal* in his testimony before the Senate Energy Committee hearing on Tuesday. The amended Compact documents resulting from four years of negotiations between the two countries "will profoundly affect the fate of the Micronesian people and the security and stability of the region for the next 20 years."

The Secretary enumerated the FSM's outstanding areas of concern to be addressed by the Congress in their approval process of the new agreements found in the amended Compact and enabling legislation, HJ Res. 63 (Compact Act). While agreement stands on the general 20-year framework for US grant assistance and the Trust Fund, and the accountability and implementation mechanisms for both, FSM and US negotiators recognize Congressional authority to make adjustments to the implementing legislation, financially and substantively.

From the FSM's perspective, the problematic provisions proposed by the Administration center on the following elements: financial adequacy of grant funding and the Trust Fund, the mechanism for inflation adjustment, and continuation of federal programs. With regard to the adequacy of grant funding, the Secretary restated the FSM's concern over a shortfall of $7 million annually between the Administration's proposal and the minimum level of assistance identified in the course of a comprehensive analysis of the nation's economic prospects.

In the area of Federal Programs, the Secretary voiced the FSM's concern over recent moves elsewhere in the US Congress to limit or eliminate Freely Associated States' eligibility and the impact such measures would have on the FSM economy. The Administration's reluctance to actively endorse unlimited extension threatens to undermine the effectiveness of the Compact to: achieve its goals to "preserve the peace and stability of the central Pacific; and to promote the continued development of the FSM on a sustainable basis." Specifically, the Secretary highlighted the problems that would be created by the proposed elimination of FEMA disaster relief assistance and a number of programs in health and education.

Additionally, Secretary Anefal indicated that during the course of negotiations, "we sought to address non-financial methods in which the US could enhance the FSM's growth prospects for the future. We seek to maintain and modernize tax and trade provisions that might have the potential to enhance the economic linkages between our two nations."

Finally, the Secretary expressed the FSM's displeasure over the process employed by the Administration negotiators in drafting Compact implementing language for the Congress without consulting the FSM or allowing the FSM the opportunity to comment until after transmittal to Congress. He highlighted the FSM objections to certain elements of this document, that had not been subject to negotiation, stating that "we wish the Committee to be aware that the FSM had no part in the drafting of these Compact Act proposals" and that the changes went beyond simple language "updating" by the Administration.

The FSM is seeking remedy of these outstanding areas of concern from the Congress as happened previously during adoption of the Compact and PL 99-239 in the 1986 approval process. Also testifying before the Committee were representatives from the Department of Interior, U.S. Office of Compact Negotiations, General Accounting Office (GAO), and the Republic of the Marshall Islands.

The Secretary led a delegation from the FSM including John Ehsa, Secretary of Finance and Administration; Paul McIlrath, Secretary of Justice; and other representatives from the FSM Departments of Economic and Foreign Affairs and the Justice Department. They joined the Washington-based staff and advisers led by Ambassador Jesse Marehalau in attending the hearing.

In addition to the hearing, the FSM delegation will hold a number of meetings with key Congressional Members and staff as Congressional Committee staff work on the joint resolution and Compact language to be marked up for approval before September 30^th, 2003, when the economic provisions of the original Compact are to expire.