    [House Hearing, 116 Congress]
    [From the U.S. Government Publishing Office]

                 SUSTAINING U.S. PACIFIC INSULAR RELATIONSHIPS

    =======================================================================

                                 JOINT HEARING

                                   BEFORE THE

                          COMMITTEE ON FOREIGN AFFAIRS

                                    and the

                       THE COMMITTEE ON NATURAL RESOURCES

                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED SIXTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                               September 26, 2019

                                   __________

                               Serial No. 116-68

                         (Committee on Foreign Affairs)

                                   __________

                               Serial No. 116-24

                        (Committee on Natural Resources)

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

           Available:  http://www.foreignaffairs.house.gov/, http://
                                docs.house.gov,
                           or http://www.govinfo.gov

                                   __________

                        U.S. GOVERNMENT PUBLISHING OFFICE
    37-848PDF                  WASHINGTON : 2020

    --------------------------------------------------------------------------------------

                          COMMITTEE ON FOREIGN AFFAIRS

                       ELIOT L. ENGEL, New York, Chairman
    BRAD SHERMAN, California             MICHAEL T. McCAUL, Texas, Ranking
    GREGORY W. MEEKS, New York               Member
    ALBIO SIRES, New Jersey		     CHRISTOPHER H. SMITH, New Jersey
    GERALD E. CONNOLLY, Virginia         STEVE CHABOT, Ohio
    THEODORE E. DEUTCH, Florida	     JOE WILSON, South Carolina
    KAREN BASS, California		     SCOTT PERRY, Pennsylvania
    WILLIAM KEATING, Massachusetts	     TED S. YOHO, Florida
    DAVID CICILLINE, Rhode Island	     ADAM KINZINGER, Illinois
    AMI BERA, California		     LEE ZELDIN, New York
    JOAQUIN CASTRO, Texas		     JIM SENSENBRENNER, Wisconsin
    DINA TITUS, Nevada		     ANN WAGNER, Missouri
    ADRIANO ESPAILLAT, New York          BRIAN MAST, Florida
    TED LIEU, California		     FRANCIS ROONEY, Florida
    SUSAN WILD, Pennsylvania	     BRIAN FITZPATRICK, Pennsylvania
    DEAN PHILLPS, Minnesota	             JOHN CURTIS, Utah
    ILHAN OMAR, Minnesota		     KEN BUCK, Colorado
    COLIN ALLRED, Texas		     RON WRIGHT, Texas
    ANDY LEVIN, Michigan		     GUY RESCHENTHALER, Pennsylvania
    ABIGAIL SPANBERGER, Virginia	     TIM BURCHETT, Tennessee
    CHRISSY HOULAHAN, Pennsylvania       GREG PENCE, Indiana
    TOM MALINOWSKI, New Jersey	     STEVE WATKINS, Kansas
    DAVID TRONE, Maryland		     MIKE GUEST, Mississippi
    JIM COSTA, California
    JUAN VARGAS, California
    VICENTE GONZALEZ, Texas

                    Jason Steinbaum, Democrat Staff Director
                   Brendan Shields, Republican Staff Director

                         COMMITTEE ON NATURAL RESOURCES

                      RAUL M. GRIJALVA, Arizona, Chairman

    JIM COSTA, California	          	ROB BISHOP, Utah,  Ranking Member
    JARED HUFFMAN, California	  	AUMUA AMATA COLEMAN RADEWAGEN,
    RUBEN GALLEGO, Arizona		                          American Samoa
    JOE NEGUSE, Colorado		  	JOHN R. CURTIS, Utah
    DEB HAALAND, New Mexico			JENNIFFER GONZALEZ COLON, Puerto
    JOE CUNNINGHAM, South Carolina		                            Rico
    DIANA DEGETTE, Colorado			GARRET GRAVES, Louisiana
    DEBBIE DINGELL, Michigan		KEVIN HERN, Oklahoma
    A. DONALD MCEACHIN, Virginia		MIKE JOHNSON, Louisiana
    ED CASE, Hawaii				TOM MCCLINTOCK, California
    MICHAEL SAN NICOLAS, Guam		BRUCE WESTERMAN, Arkansas
    PAUL TONKO, New York			DON YOUNG, Alaska
    GRACE NAPOLITANO, California		LIZ CHENEY, Wyoming
    GREGORIO SABLAN, Northern Mariana 	PAUL COOK, California
        Islands				RUSS FULCHER, Idaho
    ALAN LOWENTHAL, California		PAUL A. GOSAR, Arizona
    TJ COX, California			LOUIE GOHMERT, Texas
    MIKE LEVIN, California			JODY B. HICE, Georgia
    JEFFERSON VAN DREW, New Jersey		DOUG LAMBORN, Colorado
    NYDIA M. VELAZQUEZ, New York		DANIEL WEBSTER, Florida
    WM. LACY CLAY, Missouri			ROBERT J. WITTMAN, Virginia
    ANTHONY BROWN, Maryland
    DARREN SOTO, Florida
    STEVEN HORSFORD, Nevada
    MATT CARTWRIGHT. Pennsylvania

                        David Watkins, , Chief of Staff

                                C O N T E N T S

                                  ----------
                                                                       Page

                                   WITNESSES

    Schriver, Randall G., Assistant Secretary of Defense for Indo-
      Pacific Security Affairs, U.S. Department of Defense...........    10
    Oudkirk, Sandra, Deputy Assistant Secretary for Australia, New
      Zealand, and The Pacific Islands, Bureau of East Asian and
      Pacific Affairs, U.S. Department of State......................    20
    Pula, Nikolao, Director, Office of Insular Affairs, U.S.
      Department of the Interior.....................................    27
    Gootnick, David, Director of International Affairs and Trade,
      U.S. Government Accountability Office..........................    36
    Zackios, Hon. Gerald M., Ambassador to the United States from the
      Republic of The Marshall Islands...............................   102
    Susaia, Hon. Akillino H., Ambassador to the United States from
      the Federated States of Micronesia.............................   111

           STATEMENT FOR THE RECORD SUBMITTED FROM A COMMITTEE MEMBER

    Statement submitted for the record from Representative McCaul....   123

                                    APPENDIX

    Hearing Notice...................................................   130
    Hearing Minutes..................................................   132
    Hearing Attendance...............................................   133

                      ADDITIONAL MATERIALS FOR THE RECORD

    Statement submitted for the record from Ambassador Kyota.........   135

                RESPONSES TO QUESTIONS SUBMITTED FOR THE RECORD

    Responses to questions submitted for the record from
      Representative Engel...........................................   138
    Responses to questions submitted for the record from
      Representative Titus...........................................   144
    Responses to questions submitted for the record from
      Representative Omar............................................   151
    Responses to questions submitted for the record from
      Representative Case............................................   152
    Responses to questions submitted for the record from
      Representative Sablan..........................................   154
    Responses to questions submitted for the record from
      Representative Nicolas.........................................   165

                 SUSTAINING U.S. PACIFIC INSULAR RELATIONSHIPS

                          Thursday, September 26, 2019

                           House of Representatives,

                         Committee on Foreign Affairs,

                                   joint with

                      The Committee on Natural Resources,

                                         Washington, DC

        The Committees met, pursuant to notice, at 10 a.m., in room
    2172, Rayburn House Office Building, Hon. Eliot Engel (Chairman
    of the Committee on Foreign Affairs), and Hon. Raul Grijalva
    (Chairman of the Committee on Natural Resources) presiding.
        Present from Committee on Foreign Affairs: Representatives
    Engel, Sherman, Sires, Connolly, Bera, Titus, Lieu, Phillips,
    Spanberger, Houlahan, Trone, Smith, Chabot, Perry, Yoho,
    Zeldin, Wagner, Mast, Buck, Wright, Reschenthaler, Burchett,
    and Pence.
        Present from Committee on Natural Resources:
    Representatives Grijalva, Case, Costa, Cunningham, Sablan,
    Nicolas, Gonzalez-Colon, Lamborn, Radewagen, Gohmert, and Hern.
        Mr. Sherman [presiding]. The Committee, or I guess in this
    case, the Committees will come to order.
        This hearing is a hearing of the Natural Resources and
    Foreign Affairs Committees. The Foreign Affairs Committee will
    take the lead with the first panel, and the Natural Resources
    Committee will take the lead with the second panel.
        Without objection, all members will have 5 days to submit
    statements, questions, and extraneous material for the record,
    subject to the length limitations and the rules of the
    respective Committees.
        Chair Eliot Engel could not be here today, and he figured I
    had done 23 years on the Foreign Affairs Committee and I could
    probably handle this. We will see if he is right or not.
        The purpose of this hearing is to provide members of both
    Committees with a deeper sense of strategic importance of
    America's relationships in the Pacific region, particularly
    those with the Freely Associated States. And the title of this
    hearing is the ``U.S. Pacific Insular Relationships''.
        America's legacy in the Pacific goes back well before World
    War II, but it is best known for World War II, where my own
    father fought in some of the very islands we are talking about
    here. A failure to focus adequate resources and intention on
    this region in recent years has opened the door to other
    regional actors. Most obviously, China has taken a growing
    interest in the Pacific Islands. Further west in the Pacific,
    they are building some of their own islands. But our focus here
    is on islands created by God rather than man.
        Just last week, China pressured not one, but two Pacific
    Island States to change their diplomatic recognition from
    Taipei to Beijing. With the Solomon Islands and Kiribati
    switching their allegiance to Beijing, it is worth noting that
    two of the four Pacific Island States that still recognize
    Taiwan are Freely Associated States; namely, the Marshall
    Islands and Palau.
        The topic we are here to discuss today, of course, is the
    Freely Associated States--the Marshall Islands, Palau, and the
    Federated States of Micronesia. We share a very unique
    relationship with these three sovereign countries. The Compacts
    we have with them serve as a foundation for our exceptionally
    close ties. FAS, or Federated citizens, have the right to live,
    work, and study in the United States without a visa. FAS
    citizens serve in the U.S. military at rates exceeding most of
    the States in the United States.
        The importance of Pacific Islands should never be
    understated. They control, both strategically and economically,
    an area considerably larger than the continental United States.
    As our technology makes the oceans more important, these
    islands will become more and more important.
        We enjoy close coordination with all three governments in a
    number of areas, including counternarcotics and illegal
    fishing. The Department of Education provides Pell Grants. The
    U.S. Postal Service provides domestic mail service, and the
    National Weather Service, Federal Aviation Administration, and
    FEMA also provide critical services.
        They are among our closest diplomatic allies at the United
    Nations and provide the United States with unfettered military
    access to their land, waterways, and airspace. In turn, the
    United States is responsible for the defense and security of
    the Freely Associated States. Suffice it to say that the
    Compacts create bonds between the United States and these three
    countries that are closer than we enjoy with any other
    sovereign nation.
        Despite these historic ties, we have heard from FAS leaders
    that all too often it seems the United States has drifted away.
    Too often, our policy seems to be on autopilot. A good example
    of this was congressional inaction on the last Compact we
    signed with Palau. Although the Compact was signed in 2010,
    Congress did not get around to funding it until 2017. This
    clearly upsets the relationship, did not actually save
    taxpayers any money, and the delay seems to reflect a lack of
    attention where attention is called for.
        The current Compacts are scheduled to elapse in 2023-2024.
    Furthermore, the Trust Funds we helped establish to provide for
    these countries' economic development have not performed as
    well as we would have expected. Accordingly, the Freely
    Associated States are not capable of making up for the
    shortfall when our financial support to these countries ends.
    To prevent a reoccurrence of what happened with Palau last
    time, we must get ahead of the issue, and that is one of the
    reasons we are holding this hearing, to get all of our
    colleagues in Congress to focus on the importance of the Freely
    Associated States.
        We are holding this hearing to solicit good ideas from this
    knowledgeable panel on how to strategically shape our
    engagement with the Freely Associated States and other partners
    in the region. The Freely Associated States should not have to
    choose between inattention from their long-term friends and the
    debt traps and other devices which would erode their
    sovereignty, which will no doubt be offered by China.
        We not only have the expertise of two panels of witnesses,
    we also have three Pacific Island Delegates to the U.S.
    Congress participating in these hearings, people who live and
    represent the region and will also, through their questioning
    and comments, give us a substantial understanding of the area.
        I want to point out that we have a created a Pacific
    Islands Caucus, co-chaired by Ed Case from Hawaii, myself, Ted
    Yoho, and Don Young. This will also help focus the attention of
    Congress on this important region.
        With that, I will recognize the acting Ranking Member from
    the Foreign Affairs Committee, Ms. Wagner, for her opening
    statement.
        Mrs. Wagner. I thank the Chairman very much.
        And I want to welcome our witnesses today and to thank them
    for their work in support of U.S.-Pacific insular relations.
        The ties between the United States and our partners in the
    Pacific are of immense strategic importance. And I am glad that
    the House Committee on Foreign Affairs and Natural Resources
    have the opportunity to highlight this as we draw closer to the
    renegotiation of our Compacts of free association with the
    Federated States of Micronesia, the Republic of the Marshall
    Islands, and Palau.
        Strong relations with Pacific Island nations are the
    backbone of U.S. security in the Indo-Pacific and have been
    since before the Second World War. And for decades, Micronesia,
    the Marshall Islands, and Palau have played a central role in
    developing U.S. capabilities and extending our ability to
    protect sovereignty, rule of law, and freedom of navigation in
    the Indo-Pacific.
        Increasingly, the Pacific Islands are on the front lines of
    Sino-U.S. rivalry. China has already begun to pressure Pacific
    Island countries in an attempt to push the borders of its
    sphere of influence out to the so-called second island chain, a
    line that passes right through the Northern Mariana Islands,
    Guam, and Palau.
        Last week, China coerced two Pacific Island countries--the
    Solomon Islands and Kiribati--to break with Taiwan and,
    instead, recognize Beijing before the communist government's
    70th anniversary on October 1st. China seeks to replicate its
    diplomatic victory in Palau and the Marshall Islands by
    weaponizing its economic clout. It has banned Chinese tourists
    from visiting Palau, and it currently forces Marshall Islands
    ships to pay higher fees to enter Chinese ports.
        The United States must stand by its partners and its allies
    as they face down a belligerent and strident Beijing. China
    does not share our vision for a free and open Indo-Pacific. It
    seeks to intimidate, entrap, and coerce the countries with
    which it works into increasing China's prestige and furthering
    its own agenda.
        We in Congress are proud to support the special
    relationship the United States shares with the Marshall
    Islands, Micronesia, and Palau. The United States must continue
    to stand together with the Freely Associated States in defense
    of our common interests.
        I want thank again the Chairman for organizing this
    hearing. It is wonderful to have representatives from our
    Pacific Islands here and to be teaming up with Natural
    Resources as we delve into this.
        I yield back the balance of my time, Mr. Chairman.
        Mr. Sherman. Thank you.
        It is my understanding that the gentleman from Arizona has
    asked that his opening statement time be used by my friend
    Kilili from the Northern Mariana Islands. The gentleman from
    the Northern Mariana Islands is recognized.
        Mr. Sablan. Thank you. Thank you very much. I thank my
    colleague for yielding to me.
        I called for this hearing believing the time has come to
    begin defining a new era for the United States relationship
    with some of our closest allies, the Freely Associated States
    of the Republic of the Palau, the Republic of the Marshall
    Islands, and the Federated States of Micronesia.
        And in so doing, I also hope to signal to the Pacific
    region writ large that the United States remains committed,
    more than ever committed to this part of the world. The United
    States political history with the Freely Associated States
    began at the end of World War II. The United Nations Security
    Council entrusted us to administer these former colonies on
    behalf of the international community. We were charged with
    fostering the development of their political institutions and
    promoting their economic, social, and educational advancement.
        Speaking as someone who grew up at this time in the
    Marianas, in Micronesia, in the Trust Territory of the Pacific
    Islands, which has also been entrusted to the U.S., little was
    done at first to fulfill these responsibilities. Only after the
    cold war was in full swing did concern grow that a lack of
    commitment to political and economic development might
    jeopardize long-term U.S. security interests in the Pacific.
    And because of that concern, the U.S. significantly increased
    assistance.
        In fact, the U.S. built such a strong bond that the
    Marshall Islands and the Federated States of Micronesia all
    chose to become Freely Associated, and the people of my home
    voted to make the Mariana Islands a natural part of the United
    States and chose to become United States citizens.
        Perhaps the United States forgot the lesson in the 1970's
    because today we are facing a similar dilemma. Instead of
    combating cold war concerns, however, today's challenges are
    coming from other Pacific powers who want a realignment of
    allegiance in their favor. And the U.S. neglect of our
    relationship with Palau and the Marshall Islands and the
    Federated States of Micronesia could well be encouraging these
    friends to turn elsewhere.
        In the more than 30 years since the Compacts of Free
    Association were entered with these three island nations, the
    United States has provided more than $4 billion in direct
    financial assistance. We have established three Trust Funds,
    the earnings of which we had hoped would eventually substitute
    for this aid.
        Today's hearing will begin weighing this U.S. assistance to
    these friends against the growing influence of other powers in
    the region. So, we must ask ourselves whether we are doing
    enough in return for the military and defense rights the Freely
    Associated States have given us, including the right of
    strategic denial to block or restrict military access by third
    countries.
        While the U.S. has helped the effort in their economic
    growth through their targeted financial support, we must be
    honest; growth has not been what we had hoped. We may need to
    provide more aid, particularly in light of the GAO's 2018
    report that the FSM and the Marshalls' Trust Funds face risks
    and may not provide the self-sustaining disbursement in future
    years that were envisioned.
        While we are at the infancy stage of fulfilling the
    interagency strong support for extending financial assistance,
    which we are told is vital to secure long-term U.S. strategic
    interests, we must avoid the repeat of the Compact renewal with
    the Republic of Palau. That renewal was agreed between our two
    nations in 2010. I introduced legislation to approve it, but
    Congress did not take final action until 2018, much too long to
    keep a friendly neighbor waiting.
        I want to thank our Administration witnesses and thank them
    for being here. Their presence underscores the importance of
    this issue to national security. I commend the Administration
    for its willingness to secure and strengthen our Nation's
    relationship with these allies who vote with us at the United
    Nations more than any other nations.
        And finally, I want to welcome my friends, Ambassador
    Zackios from the Republic of the Marshall Islands, and
    Ambassador Susaia from the Federated States of Micronesia.
    Welcome. I look forward to hearing about your governments'
    priorities for enhancing and moving the relationship with our
    two nations forward.
        And thank you, Mr. Chairman, and I yield my time back.
        Mr. Sherman. Thank you.
        It is my understanding that acting as Ranking Member for
    the Natural Resources Committee is the Resident Commissioner
    from Puerto Rico, who is now recognized for a 5-minute opening
    statement, after which I will recognize others in attendance
    who are interested in making a 1-minute opening statement. That
    does not mean you need to.
        [Laughter.]
        Miss Gonzalez-Colon. Thank you, Mr. Chairman, and I
    appreciate it.
        I think this is a great opportunity to have the Foreign
    Affairs Committee and the Natural Resources Committee jointly
    doing a hearing about a very important issue for the United
    States security, but also for the interests of the United
    States in the region.
        As a Member representing an island, I know how important it
    is to acknowledge all the situations in the past 50 years, as
    well as the status of the Compact. In that regard, we will be
    reviewing the United States relationship and interests with the
    Freely Associated States--the Republic of the Marshall Islands,
    the Federated States of Micronesia, and the Republic of Palau.
        I welcome the Ambassadors as well the members from the
    Government of the United States for this first panel.
        Our relationship with these three independent island
    nations dates back to World War II, as the Chairman just
    established, and it is currently governed by the Compact of
    Free Association that serves mutual interests. The Freely
    Associated States defer to the U.S. on decisions related to
    their external security and receive U.S. economic assistance
    and security guarantees. In return, our Nation has access to
    their lands and waters for strategic purposes and, more
    importantly, we have the ability to deny other countries the
    same access for providing that kind of security, as Ms. Wagner
    just said a few minutes ago about the increasing interest of
    China in the region.
        In 2023 and 2024, the financial assistance authorization
    provided by the Compact of Free Association as amended and the
    Compact Review Agreement are set to expire. The financial
    assistance provided under this agreements has been essential to
    the three island nations.
        I, therefore, look forward to having this productive
    discussion on how this expiration will impact the daily life of
    the Freely Associated States. And I also want to know about the
    implications it could have on the United States' strategic
    interest in the South Pacific region, particularly whether it
    could create a leadership void that other nations like China
    might seek to fill.
        I want also to hear from our witnesses on policy options
    these Committees can discuss and we can pursue to increase the
    Freely Associated States' economic self-reliance and ensure a
    brighter future for those countries.
        I want to thank both Chairmen for calling today's hearing.
    And after having for the first time a joint meeting with the
    President of the United States in May of this year from the
    three independent States, I think it is the first time that
    happened. And last, in August of this year, Secretary Pompeo
    got a separate meeting discussing the same issue with one of
    the islands. I think this is the right time to have these kinds
    of discussions in how can Congress help in this regard.
        I want to recognize Ms. Amata Radewagen from the American
    Samoan Island, who is part of the Natural Resources Committee
    in the House, that is part of this delegation that is well
    represented actually, the Pacific Islands.
        With that, I will yield back the balance of the time.
        Mr. Sherman. Thank you.
        I will see if anyone needs--yes, the gentleman from Guam is
    recognized.
        Mr. San Nicolas. Thank you, Mr. Chairman. I am deeply
    grateful for this joint hearing that we are going to be
    conducting here today for the purposes of really getting to the
    bottom of our relationship with the Compact of Free Association
    and those States that are so associated.
        It is important for us in the context of today's hearing to
    remember that the reputation of the United States as an
    administering power is no better represented than in our U.S.
    territories, our tribal nations, and our freely associated
    allies. And this relationship is wholly responsible for
    establishing our reputation on the world stage. No matter how
    much we go out diplomatically to try to talk about whether or
    not the United States is a good partner or a good ally, it is
    entirely reflected in whether or not our territories, our
    tribal nations, and our freely associated allies are succeeding
    or failing. And the success or failure of these administered
    areas rests largely with the Department of the Interior.
        And so, Mr. Chairman, I am very grateful for this hearing,
    so that we can discuss the success, particularly of our freely
    associated allies, and the administering responsibilities of
    the Department of the Interior, because the soft power
    implications of our ability to get this right have direct
    relations to our hard power responsibilities in maintaining
    peace and security throughout the globe.
        Mr. Chairman, I yield back.
        Mr. Sherman. Thank you.
        I understand the gentlelady from American Samoa would seek
    recognition. Recognized for 1 minute.
        Mrs. Radewagen. [Speaking foreign language.]
        Thank you, Mr. Chairman, Chairman Sherman, Chairman Sablan,
    and Ranking Members Wagner and Gonzalez-Colon, for holding this
    joint hearing on this very important issue.
        And thank you to the witnesses for taking time out of your
    busy schedules and coming here to testify.
        Special greetings to Ambassadors Zackios and Susaia, and
    Nikolao.
        The Freely Associated States are near and dear to my heart.
    Whenever I have the opportunity to visit any of these island
    countries, it feels like I am being welcomed home. In fact, I
    actually did have the privilege of living in the Marshall
    Islands for a number of years.
        The Freely Associated States are, arguably, our most
    important allies in the Pacific. Not only are they important
    security partners, the people of these island countries have a
    direct cultural and social impact on the United States and the
    territories. Their citizens live and work in our communities
    and serve in our military. They are our neighbors and family
    members. The American Government does not just have an
    obligation to these island nations; the amount of value we
    receive out of our agreements with the FAS means we owe it to
    the American people to maintain these relationships.
        Thank you, Mr. Chairman. I yield back.
        Mr. Sherman. Thank you.
        I see no other members seeking recognition. So, we will now
    move on to our first witness.
        Randall Schriver began his career in the Navy, served in
    important positions in the State Department, went on to
    positions in the private sector, and now serves as Assistant
    Secretary of Defense for Indo-Pacific Security Affairs.
        Mr. Schriver.

       STATEMENT OF RANDALL G. SCHRIVER, ASSISTANT SECRETARY OF
     DEFENSE FOR INDO-PACIFIC SECURITY AFFAIRS, U.S. DEPARTMENT OF
                                DEFENSE

        Mr. Schriver. Thank you. Good morning, Chairman and Ranking
    Members. I appreciate the opportunity to be here today to talk
    about these important relationships with the Freely Associated
    States.
        Our relationships with the Freely Associated States are
    critical to advancing our strategy to promote the free and open
    Indo-Pacific. We are advantaged by a deep and rich shared
    history, but also shared values and interests. We and the
    Freely Associated States believe strongly in respect for a
    safe, secure, prosperous, free, and open Indo-Pacific region
    that must preserve the sovereignty of all States, no matter
    their size. We stand together with these important allies and
    will sustain U.S. security guarantees to the Freely Associated
    States.
        The importance of these efforts is growing as we are
    increasingly confronted with a more assertive and confident
    China that is willing to accept friction in pursuit of its
    interests. There are, of course, other challenges that we work
    with our partners in the Freely Associated States in the Indo-
    Pacific, such as persistent and evolving threats from non-State
    actors, emerging threats across new domains such as cyber and
    space, and a range of transnational threats, such as natural
    disasters; illegal, unreported, and unregulated fishing;
    piracy; drug trafficking, and the impact of climate change.
        Given our strong relations with the Freely Associated
    States, we have a particular concern by China's use of coercive
    tools to attempt to erode their sovereignty and induce them to
    behave in accordance with Chinese interests. As was mentioned,
    China has applied pressure to Taiwan's diplomatic partners,
    including Palau with the banning of Chinese tourists and the
    economic coercion that the Ranking Member mentioned that led to
    a switch in diplomatic recognition on the part of two Pacific
    Islands just last week.
        Our policy response at the Department of Defense is through
    implementation of the National Defense Strategy in which the
    Freely Associated States feature prominently in its
    implementation. We seek to build a more lethal and resilient
    joint force where we prioritize investments in key technologies
    and key areas of modernization, and the Freely Associated
    States are partners with us on this effort.
        As an example, the Marshall Islands host the Reagan
    Ballistic Missile Defense test site, which provides tremendous
    opportunities for us in our modernization efforts. The site
    enables cutting-edge U.S. Army and Air Force space and missile
    defense research and is leading to advanced technologies such
    as hypersonic test programs and the development of advanced
    surveillance systems.
        Also related to the implementation of our National Defense
    Strategy, we seek to strength alliances and attract new
    partners. These networks are critical to our ability to protect
    the U.S. and enable our forward presence, but it also gives us
    partners who are more capable to defend themselves and
    contribute to regional security. Consistent with growing
    partnership capability and in line with the 2018 Boe
    Declaration, we aim to build capacity and resilience,
    particularly to address challenges such as maritime security.
    The Freely Associated States are also critical to our
    Department's long-term strategy, as they grant us access and
    they support us in international fora.
        All three countries also contribute to our mutual defense
    by their service in the U.S. Armed Forces, as was mentioned by
    the Chairman and other members, at per capita rates higher than
    most U.S. States. And their citizens have paid the ultimate
    sacrifice with lives lost in combat in Iraq and Afghanistan.
        The Freely Associated States are also active contributors
    to the international pressure campaign on North Korea. We work
    with the Marshall Islands and Palau, for example, to prevent
    use of their ship registries to evade sanctions against North
    Korea.
        In Palau, the United States is working to provide radar
    equipment and technical support critical to improving maritime
    domain awareness, including air and surface awareness in the
    South and East China Seas. The radar will enhance our ability
    to compete with China in the region and will enable Palau to
    understand what is happening in its own sovereign territorial
    waters.
        To conclude, we are part of a whole-of-government
    engagement strategy in the Oceania region, and we are engaging
    in important ways. We have conducted an unprecedented number of
    DoD senior-level visits to the region in the last year and a
    half. We are also stepping up our work with like-minded allies
    and partners, such as Australia, New Zealand, France, and
    Japan, to protect the sovereignty and maritime rights of the
    Pacific Islands.
        Going forward, we also recognize that Compact guarantees
    and obligations are critical in the context of competing
    effectively with China, as Beijing is actively targeting this
    region in an effort to expand its own influence. In this
    regard, the Department of Defense strongly supports our
    interagency efforts to extend the economic provisions of the
    Compact to secure our long-term strategic interests in this
    vital region.
        Thank you again, and I look forward to your questions.
        [The prepared statement of Mr. Schriver follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Sherman. Thank you.
        Ms. Sandra Oudkirk is a career diplomat. She is Deputy
    Assistant Secretary for Australia, New Zealand, and the Pacific
    Islands in the Bureau of East Asian and Pacific Affairs at the
    Department of State.
        You are recognized.

      STATEMENT OF SANDRA OUDKIRK, DEPUTY ASSISTANT SECRETARY FOR
    AUSTRALIA, NEW ZEALAND, AND THE PACIFIC ISLANDS, BUREAU OF EAST
          ASIAN AND PACIFIC AFFAIRS, U.S. DEPARTMENT OF STATE

        Ms. Oudkirk. Good morning. Chairman, Ranking Members,
    distinguished members of both Committees, thank you for the
    opportunity to appear before you today with my distinguished
    fellow panelists.
        As has been noted already, the Indo-Pacific is the most
    populous and economically dynamic region of the world. The U.S.
    interest in a free and open Indo-Pacific extends back to the
    earliest days of our Republic. Our relationships with the
    Republic of the Marshall Islands, the Federated States of
    Micronesia, and the Republic of Palau, collectively referred to
    as the Freely Associated States, have since World War II
    contributed to a secure, stable and prosperous Indo-Pacific
    region.
        Together, these three countries form a strategic bridge
    stretching from Hawaii to the Philippines, a span equivalent to
    the breadth of the continental United States. As has been
    noted, we have full responsibility and authority for security
    and defense matters in or relating to these three countries. We
    can deny other countries' militaries access to these countries,
    and the three governments consult closely with us on their
    foreign policies.
        Importantly, the Freely Associated States hold strong to
    their core democratic values. This is the foundation that
    underpins our relationship and our cooperation. As Secretary
    Pompeo has said during his August visit to Micronesia, these
    small islands are big strongholds of freedom. They are proven
    partners and friends. The Marshall Islands, the Federated
    States of Micronesia, and the Republic of Palau are
    historically among the United States' strongest supporters at
    the United Nations. The Freely Associated States stand with us
    to combat anti-Israel bias and stood with us on the Jerusalem
    vote. In addition, Palau and the Marshall Islands are two of
    the now 15 countries that maintain diplomatic ties with Taiwan.
        We work closely with the Freely Associated States on the
    full range of law enforcement issues. We train law enforcement
    personnel from all three countries. We conduct joint maritime
    law enforcement patrols, and we cooperate on law enforcement
    investigations.
        Eligible citizens of all three countries can and do travel
    without visas to live, work, and study in the United States.
    Citizens of the Freely Associated States serve in the U.S.
    Armed Forces at rates higher than most U.S. States, and 18
    servicemembers have lost their lives in combat since World War
    II.
        The United States must continue to deepen our engagement
    with the Freely Associated States, especially now at a time of
    increased competition from China, Russia, and other countries
    who seek to exert greater influence in the Pacific region.
        Our Compact relationships do not have an end date. However,
    the scheduled end of U.S. economic assistance is rapidly
    approaching, and now is not the time to leave these small,
    sovereign, partner nations open to the predations of larger
    countries.
        For example, China has significantly increased its
    engagement with the Pacific Islands over the past decade. China
    has provided $1.8 billion in economic assistance to the Pacific
    Islands since 2006, now putting it third in terms of donations,
    behind Australia at $7.7 billion and the United States at $1.9.
    China's engagement is still growing.
        Against this backdrop of growing competition, there is
    uncertainty across the Pacific about the United States'
    willingness and ability to sustain the robust bilateral
    presence that has contributed to peace, stability, and
    prosperity in the region. Our allies, partners, and other
    Pacific Island countries see our relationships with the Freely
    Associated States as a bellwether, as a signal of our
    commitment to the broader Indo-Pacific.
        On August 5th, during the first visit by a Secretary of
    State to the Federated States of Micronesia, Secretary Pompeo
    announced that the United States will begin consultations on
    certain provisions of our respective Compacts of Free
    Association with each country. We are coordinating closely
    across the interagency to evaluate our options. These
    agreements are complex. They require a thoughtful approach with
    extensive consultations to make sure that we get them right. An
    interagency group will travel to all three countries in October
    to better understand the needs and perspectives of each of the
    three countries.
        We are committed to working collaboratively with Congress
    to explore ways in which we might further strengthen our
    relationship with the Freely Associated States. Chairman
    Sherman, Chairman Sablan, Chairman Grijalva, Ranking Members
    Wagner and Gonzalez-Colon, distinguished members of the
    Committee, thank you again for the opportunity to appear before
    you today. We look forward to working closely with you and your
    colleagues in Congress to ensure that the United States can
    effectively secure U.S. interests in the Indo-Pacific. Thank
    you.
        [The prepared statement of Ms. Oudkirk follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Sherman. We have with us the executive branch's liaison
    with the Freely Associated States. He is Nikolao Pula, the
    Director of the Office of Insular Affairs at the Department of
    the Interior, and he is recognized for 5 minutes.

    STATEMENT OF NIKOLAO PULA, DIRECTOR, OFFICE OF INSULAR AFFAIRS,
                    U.S. DEPARTMENT OF THE INTERIOR

        Mr. Pula. Thank you, Mr. Chairman. Thank you, members of
    the Committees, and the distinguished members of both
    Committees. Thank you for the opportunity to testify before
    your Committees this morning. I am Nik Pula, Director of the
    Office of Insular Affairs at the Department of the Interior.
        Having traveled to each of these countries multiple times,
    I can assure you that the Federated States of Micronesia, the
    Republic of the Marshall Islands, and the Republic of Palau
    share a unique and special relationship with the United States.
        My colleagues at the Department of State and Defense
    discussed the diplomatic and military importance of our
    relationship with these Freely Associated States. I will focus
    on the financial assistance provided by Congress through
    Interior.
        The Department has partnered with the people of the former
    Trust Territory of the Pacific Islands since 1951, when the
    Navy transferred civil administration to Interior. Given our
    historic role, Congress determined then that Compact funding
    would flow through Interior. That continues today.
        No other independent nation with diplomatic and military
    relationships with the United States also has a relationship
    with the Department of the Interior. This can be attributed to
    the unique and special history that we have shared and continue
    to share going forward.
        This Compact framework has successfully ended their
    trusteeship status and restored stable, sovereign, and
    democratic self-governance to the Freely Associated States
    while providing the United States with continued access to this
    strategic region.
        The Compacts allowed their citizens entry into the United
    States visa-free as legal non-immigrants to live, work, and
    study here. Mainly families and individuals now live in the
    United States and also serve in the United States Armed Forces,
    adding to the growing American Pacific Islander diaspora,
    another source of strength to the United States relationship
    with the Freely Associated States.
        Through Interior alone, the U.S. has provided the FSM and
    RMI approximately $3 billion in financial assistance over the
    last 15 years from Fiscal Year to 2019. From 1994 to 2009,
    Palau benefited from U.S. financial assistance totaling
    approximately $560 million. And under the 2010 Palau Compact
    Review Agreement, passed by the Congress last year, an
    additional total of $229 million was made available to Palau.
        The financial assistance included in the Compacts for the
    FSM and the RMI has primarily supported the delivery of health
    and education services, infrastructure development such as
    hospitals, health centers, roads, utilities, and schools. The
    Compacts have also established Trust Funds for the FSM and the
    RMI to provide an additional source of funding when annual
    grants funding eventually ceases in 2023. The U.S. Compact
    relationship with Palau is different, but similar. Financial
    assistance to Palau supports government operations,
    infrastructure projects, and a Trust Fund.
        Neither the United States nor the Freely Associated States
    intended for any of the Compact agreements to underwrite the
    entire economies or the full operations of its country. Rather,
    the Compacts were intended to provide an economic springboard,
    making available the resources to allow the FSM, RMI, and Palau
    to improve essential government services and infrastructure
    while they reform the business climate, fiscal policies, and
    their capacity to govern.
        The Joint Economic Management Committees with the FSM and
    the RMI, both established under the Compact law, provide an
    opportunity for annual bilateral discussions on financial
    assistance issues and serve as an additional accountability
    mechanism. Compact grant assistance and payments to the Trust
    Funds for the FSM and RMI expire in 2023 and for Palau in 2024.
    As currently structured, post-2023-2024, the Trust Funds
    provide a transition away from direct U.S. grant assistance and
    toward economic self-sufficiency. At the end of Fiscal Year 8,
    the balance of the FSM Trust Fund was $636 million; RMI's was
    $402 million, and Palau's was $286 million.
        However, while the Trust Funds have grown and performed
    well, there are legitimate concerns about the expected
    distributions after 2023 and 2024. If funding under the Compact
    is not extended after 2023 and 2024 or the Trust Funds are not
    bolstered, the FSM, RMI, and Palau are all likely to experience
    significant economic shock with detrimental destructions to
    health, education, and government operations. The stability and
    balance of our relationship in this region that we have
    engendered thus far may suffer.
        Thank you, and I am happy to answer any questions.
        [The prepared statement of Mr. Pula follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Sherman. Thank you for your testimony.
        David Gootnick is the Director of International Affairs and
    Trade at the U.S. Government Accountability Office. He also
    leads the Department's work on the Compacts of Free
    Association.
        Dr. Gootnick.

    STATEMENT OF DAVID GOOTNICK, DIRECTOR OF INTERNATIONAL AFFAIRS
            AND TRADE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

        Dr. Gootnick. Thank you, Mr. Chairman. Chairmen, Ranking
    Members, and members of the Committees, thank you for the
    opportunity to participate in this hearing. I am going to focus
    in some detail on the economic assistance to the Republic of
    the Marshall Islands and the Federated States of Micronesia,
    introduced by my colleague, Mr. Pula.
        Under the amended compacts with Micronesia and the Marshall
    Islands, Sector Grants and Special Education Grants, known as
    the SEG, are scheduled to end and Trust Fund disbursements to
    begin in 2023. In my remarks today, I will focus on two key
    issues associated with this transition. First, the extent to
    which the two countries currently rely on U.S. support and,
    second, the status of their Trust Funds.
        First, on reliance on U.S. assistance, the Sector Grants
    and the SEG continue to support a substantial portion of
    government resources in both countries. In the FSM, these
    grants were roughly one-third of all government expenditures in
    2016 and nearly one-half of their expenditures if you add in
    other U.S. programs and services, which I will get to in a
    moment. In the FSM, the reliance on these grants varies
    considerably by State. Chuuk State, with the largest population
    and lowest per capita GDP, is the most reliant on these grants.
    There, these grants support about 85 percent of the health
    sector and 95 percent of the educational system. The Marshall
    Islands is somewhat less reliant on these grants. Overall, they
    support about one-quarter of government expenditures. Yet, they
    represented about a third of the health sector and two-thirds
    of the educational system.
        Both countries are also facing a transition in the
    availability of U.S. programs and services provided for by the
    compacts and their implementing legislation. After 2023, some
    of these programs and services are set to continue and some are
    not. So, for example, based on current U.S. law and the
    assessment of agency officials, FEMA funding for disaster
    relief and the services of the U.S. Postal Service will no
    longer be available. Likewise, the FDIC will no longer have the
    authority to insure deposits in the Bank of Micronesia. Other
    programs and services such as FAA civil aviation and USAID's
    disaster response may continue under other authorities. And
    yet, still other programs and services can continue without
    change. For example, eligibility for Pell Grants, Special
    Education Grants, and numerous public health programs will
    continue.
        There is an addendum to my written statement which provides
    an analysis of the status of most U.S. programs after 2023. I
    think it is a useful reference on this complex topic.
        Regarding the Trust Funds, at GAO we recently ran 10,000
    simulations of the Trust Funds under a range of scenarios. We
    found that under their current structure the Trust Funds are
    unlikely to consistently provide annual disbursements at the
    level of Sector Grants and may provide no disbursements at all
    in some years. These risks increase significantly over time.
    So, for example, in our analysis the FSM faces a 40 percent
    likelihood of zero disbursements in one or more years in the
    first decade after 2023. It is a greater than 90 percent risk
    if you run that analysis out 40 years. For the RMI, the risks
    are somewhat lower. It is 15 percent in the first decade; yet,
    more than 50 percent over 40 years. These results are entirely
    consistent with those of the Asian Development Bank and
    analysis funded by Interior.
        These risks have been known for some time and there have
    been proposals to mitigate these shortfalls. A number of these
    proposals rely on changing the constraints on disbursement
    built into the Trust Fund agreements. However, absent a
    reduction in planned disbursements or an increase in
    contributions, these changes, in and of themselves, will not
    resolve the shortfall in the Trust Fund balances. Additionally,
    some of these proposals represent changes in the Trust Fund
    agreements, and on the U.S. side this would require
    implementing legislation.
        Finally, migration under the compacts is set to continue
    after 2023. The most recent enumeration shows roughly 38,000
    compact citizens residing in Hawaii, Guam, and the Mariana
    Islands. Compact nation citizens have been recruited by U.S.
    firms, and migrant communities in the continental U.S. are
    growing, and in many cases quite successfully. GAO has and will
    continue to provide information on the demographics of compact
    migration and insight on the key issues faced by migrants and
    the affected jurisdiction.
        Chairmen, Ranking Members, members of the Committees, this
    completes my remarks. I am happy to answer your questions.
        [The prepared statement of Dr. Gootnick follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Sherman. Thank you.
        We will now go to recognizing members. Rather than
    recognizing myself, I will recognize the Chair of the full
    Committee, Mr. Engel.
        Chairman Engel. Thank you, Mr. Chairman. I want to thank
    Mr. Sherman for his hard work in working for this very
    important issue and, also, in our 2172 Foreign Affairs room.
    So, thank you so much, Mr. Chairman.
        Thank you to the witnesses for testifying on the many
    elements of the important and unique friendship relationship
    between the United States and the Freely Associated States.
        I am very happy that we were able to organize this joint
    hearing with Chairman Grijalva, Vice Chairman Sablan, and the
    other members of the Natural Resources Committee, who have,
    along with the Foreign Affairs Committee, taken the lead on
    relations with the Freely Associated States over the years.
        I look forward to working with the Natural Resources
    Committee as we engage on these issues in the months and years
    ahead to ensure that we have a good outcome to upcoming
    negotiations on new Compacts of Association, so the U.S. and
    the Freely Associated States can strengthen our ties, safeguard
    our sovereign interests, and ensure our mutual defense well
    into the future.
        Despite the deep historic ties between our nations and the
    region's strategic importance, there is, frankly, not a lot of
    awareness about the Freely Associated States here in the United
    States. This hearing provides a good opportunity to put them
    back on the radar screen. Our relations with the Freely
    Associated States are a very important part of our overall
    Indo-Pacific strategy. The way we handle the compacts will
    demonstrate not only how we treat some of our closest friends,
    but America's commitment to the Pacific as a whole. So, I am
    very glad that we have an opportunity today to discuss how the
    United States and the FAS can deepen and broaden our bilateral
    engagement.
        And again, I want to thank Mr. Grijalva, Mr. Sablan, and
    Mr. Sherman.
        I have one question that I would like to ask Ms. Oudkirk. I
    have long believed that the United States should have
    diplomatic representation in every country of the world.
    Recently, during his visit to the Federated States of
    Micronesia, Secretary Pompeo said he was examining how our
    government can best interact with the Freely Associated States
    to put our relationship on a sound footing for the decades to
    come. May I ask you, what do you think about reassigning
    responsibilities for the Freely Associated States from the
    Department of the Interior to the Department of State or some
    other agency? And what would be the advantages and
    disadvantages of doing so?
        Ms. Oudkirk. Thank you very much, Chairman Engel.
        So, just to be very clear, we have accredited Ambassadors
    in place in each of the three Freely Associated States and
    embassies in each of those countries. So, the State Department
    does conduct our diplomatic relationship with those three
    countries as per normal, as we would with other countries in
    the world. The difference is, as Mr. Pula noted, the Department
    of the Interior implements the assistance under the Compacts.
    So, I think we believe we have a good arrangement, a good
    division of labor here. And additionally, Mr. Gootnick
    describes many of the domestic programs that are made available
    to the Freely Associated States from the post office to the
    Weather Service, and that is also additional and somewhat
    unique. But the diplomatic and foreign affairs relationship is
    conducted by the State Department.
        Chairman Engel. How many State Department officers are
    assigned to U.S. Embassies in Koror, Kolonia, and Majuro? And
    are these resources sufficient to achieve U.S. interests and
    goals?
        Ms. Oudkirk. If I may, sir, I will take that question back
    and give you a precise answer. I think that we believe that we
    are doing a good job. We are in the process of augmenting staff
    in many of our Pacific embassies, not just in the Freely
    Associated States. But I will get back to you with a precise
    number on the breakdown of the representatives country by
    country.
        Chairman Engel. All right. Thank you very much. And thanks
    to all our witnesses for testifying today. Thank you.
        Mr. Sherman. Thank you.
        The gentlelady from Missouri is recognized.
        Mrs. Wagner. I thank the Chairman very much.
        Ms. Oudkirk--is that correct?--as I asked Assistant
    Secretary Stilwell last week before the Asian-Pacific
    Subcommittee, have you considered traveling to Taipei, in
    accordance with the Taiwan Travel Act, to demonstrate America's
    support for Taiwan in the wake of the Solomon Islands' and
    Kiribati's to break with Taiwan?
        Ms. Oudkirk. I am traveling to Taiwan in 2 weeks. I am the
    U.S. senior official for APEC. So, in my APEC capacity, I will
    be traveling to Taiwan to consult with them on APEC-related
    issues.
        Mrs. Wagner. Much better answer than I received last week.
        Mr. Sherman. Hallelujah.
        Mrs. Wagner. Yes, and the Chairman concurs. That is
    wonderful, and I am so pleased that you are going to do that.
    We need to make a strong statement about this, and I believe
    that Assistant Secretary Schriver underscored that also in his
    testimony. We cannot have China bullying our friends and allies
    in the region, and it is very important that Taiwan understands
    how important strategically and trade-wise and in our values
    and support that we have for them. So, I am very, very pleased
    to hear that.
        Mr. Connolly. Would the gentlelady yield just for 1 second?
        Mrs. Wagner. Absolutely.
        Mr. Connolly. I just want to associate myself with her
    remarks. I am the Co-Chair of the Taiwan Caucus. And on both
    sides of the aisle, I think what you just expressed expresses
    our views as well.
        Thank you. I thank my friend.
        Mrs. Wagner. Absolutely. And I just love it when we have
    these wonderful bipartisan moments of agreement.
        [Laughter.]
        Ms. Oudkirk, what steps will the Trump Administration take
    to make sure that support for Taiwan among the Marshall Islands
    and Palau, the Freely Associated States that recognize Taipei's
    sovereignty, make sure that does not erode further?
        Ms. Oudkirk. So, thank you very much, Congressman Wagner.
        Taiwan is a democratic success story. It is a reliable
    partner. It is a force for good in the world. The United States
    will continue, and this Administration will continue, to
    support Taiwan, especially as it seeks to expand its already
    significant contributions to addressing global challenges and,
    in particular, its support to its diplomatic partners in the
    Pacific, including the Republic of the Marshall Islands and
    Palau.
        We believe that China's active campaign to alter the Cross-
    Strait status quo, including by enticing countries to
    discontinue their diplomatic ties with Taiwan, is harmful. This
    effort undermines regional stability. It undermines a framework
    that has been established for decades and that has enabled
    peace, stability, and development across the Indo-Pacific.
        Mrs. Wagner. Thank you. I very much appreciate your
    testimony for the record, and I think it is a very good setup
    for your trip in 2 weeks to Taiwan. I look forward to an out-
    read on that, and I think many on the Committee do. We hope
    that you will come back and visit with us about that.
        Assistant Secretary Schriver, can you explain how the
    Freely Associated States fit into our defense posture in the
    Pacific a little more broadly?
        Mr. Schriver. Thank you.
        They are very important partners across a range of
    activities, as I mentioned in the testimony, the research and
    development, the security cooperation on issues like North
    Korea. With respect to posture, in particular, they provide
    opportunities for logistic support. If you look at the
    distances from Hawaii to Guam and through other areas of the
    Indo-Pacific, there are nodes there that are helpful in
    logistic support, and certainly in the case of a conflict, they
    would be absolutely critical. They provide access for training,
    such as Pacific Partnership. There are possibilities of future
    facilities, but no decisions have been made at this point to
    build out further, other than in the areas I mentioned.
        Mrs. Wagner. If the U.S. Department of Defense no longer
    has the right of denial over foreign military activity in the
    Freely Associated States, how would that affect U.S. national
    security?
        Mr. Schriver. We would be greatly concerned, particularly
    if the absence of that right of denial then led to a more
    permissive environment for access to certain actors and, in
    particular, we would be concerned about Chinese access there.
    So, we are grateful for that, and we think it is a mutually
    beneficial relationship.
        Mrs. Wagner. You may not have time to answer this, but let
    me just say, Assistant Secretary Schriver, China is clearly
    seeking to build military, dual-use infrastructure throughout
    the Pacific Islands, such as piers that can accommodate Chinese
    navy ships. What are China's dual-use infrastructure plans for
    the region and what would these facilities mean for our
    defense?
        Mr. Schriver. I think the Chinese are very opportunistic
    and they are looking for permissive environments where they can
    use economic assistance and infrastructure support such as
    piers that will create later access opportunities for the PLA.
    So, it is something we watch very carefully and want to make
    sure that our influence and our relationships are as strong as
    possible to prevent that.
        Mrs. Wagner. Thank you. My time has expired. I yield back.
        Mr. Sherman. At this point, I will recognize the Chair of
    the full Natural Resources Committee, the gentleman from
    Arizona.
        Chairman Grijalva. Thank you, Mr. Chairman. And thank you
    for the hearing and for the work of our respective staffs on
    both Committees for putting this together; and to the
    witnesses, of course.
        Dr. Gootnick, the situation with the Trust Fund and the
    predictions in terms of its viability going forward, absent any
    real change, any readjustment, any renegotiation, the scenario
    you laid out, maybe you can repeat that part of it again?
        Dr. Gootnick. Sure. The Trust Funds were established with
    the intent of preserving the corpus, the body of the Trust
    Fund, and that was the focus at the time they were set up.
    There are three separate accounts--the corpus, the disbursement
    account, and a rainy day fund, if you will, and there are rules
    that govern funds being shifted between those funds and funds
    that are available for disbursement. That is the constraint
    that in the short run may lead to years where there are zero
    disbursements or a number of years where the disbursements do
    not equal the value of the Sector Grants that end in 2023. Now
    there is no specific provision that the Trust Funds would meet
    the value of the Sector Grants, but that is kind of a benchmark
    that a number of people have used.
        Chairman Grijalva. That is perhaps an expectation at some
    point, that it would meet the benchmark, but it is not part of
    the agreement?
        Dr. Gootnick. The agreement does not----
        Chairman Grijalva. Got you.
        Dr. Gootnick [continuing]. Explicitly and fully limit the
    distribution to the inflation-adjusted Sector Grants.
        Chairman Grijalva. Mr. Pula, if I may, we have heard
    primarily about national security in opening statements and in
    much of the testimony. And I do not disagree with that. There
    is an urgency there, and that urgency has to be dealt with.
        But, since 1951 when Interior assumed the responsibility,
    and the Resources Committee assumed the responsibility of that
    jurisdiction, security has been part of the issue. But I want
    to get from you--there is a humanitarian side to this issue as
    well. Understand the national defense/security thing. It is not
    an issue of argument or ``either/or,'' but it is a ``both''
    question. And the humanitarian concerns that we have in terms
    of the degrees of services and attention that we bring to the
    people of the FAS, let's talk about that humanitarian side of
    this issue and the responsibility that this Congress and
    Interior have to make sure that that is part of the equation.
    And sometimes I hope we do not lose that part in the discussion
    about the need to backstop China and do all those other things
    that I do not disagree with at all, but there is a human side
    to this and those other people on that island and the migration
    attendant to that. If you would?
        Mr. Pula. Thank you, Mr. Chairman.
        You know, I have been doing this job for the Department of
    the Interior for over 20 years, and I can tell you and the
    members of the Committees that dealing with the Freely
    Associated States has been a special part of my personal work
    and in terms of the Department, in cooperation with the State
    Department, with the Ambassadors that are in the three
    countries. It has been an experiment of----
        Chairman Grijalva. More to the point, the investment that
    we are currently making----
        Mr. Pula. Yes.
        Chairman Grijalva [continuing]. To deal with all the
    issues, and to strengthen the relationship, my perception is
    that it is not enough. And so, I am asking.
        Mr. Pula. Well, let me say, Mr. Chairman, the law, the
    Compact, or the current agreement provids funding that we work
    with. Now if your question is, is that enough? My answer would
    be_it depends on who you ask. The way we at the Department of
    the Interior working with the three Freely Associated States,
    as you may well recall, during the cold war, when we came up in
    2003 in the beginning of this amended Compact which ends 2023,
    the agreement that we now have provides for some
    accountability. And the reason why I said that, the first 15
    years funding went to the countries, and Congress felt, well,
    so what do we have to show for it? So, in 2003, the United
    States provided funding to six sectors. In those six sectors,
    basically, the primary ones are health, education,
    infrastructure, and then, the other minor ones.
        Chairman Grijalva. So, the answer on the investment
    question I asked you is ``It depends.''?
        Mr. Pula. Yes.
        Chairman Grijalva. Yield back. I think my time is up.
    Appreciate.
        Mr. Sherman. Thank you.
        I now recognize the Resident Commissioner.
        Miss Gonzalez-Colon. Thank you, Mr. Chairman.
        My first question will be, Mr. Schriver, in your written
    testimony you note a concern with ``China's use of coercive
    tools to attempt to erode Pacific Island serenity and to induce
    them to behave in accordance with Chinese interests.'' What do
    you mean by that in terms of the tools? What tools?
        Mr. Schriver. We see economic coercion, the use of debt
    trap diplomacy. We see diplomatic and political pressure, the
    sense that China is large in the region, not going away, and
    you need to deal with us on our terms. So, they have a range of
    ways of applying pressure, and it is increasingly difficult,
    particularly for smaller States, to stand up to that, which is
    why I think our partnership with the Freely Associated States
    and others is so important.
        Miss Gonzalez-Colon. And you also say for those Pacific
    nations to behave in accordance with Chinese interests. What
    specifically does China want them to do?
        Mr. Schriver. Well, there is tremendous pressure.
        Miss Gonzalez-Colon. Taking a loan?
        Mr. Schriver. Ma'am, first of all, I would say there is
    tremendous pressure on the remaining diplomatic allies of
    Taiwan to switch diplomatic recognition. We saw two States,
    countries, last week male that sovereign choice to change, and
    there is pressure on Palau, pressure on the Marshall Islands.
        There is a range of other things that China may ultimately
    apply pressure--their positions on the South China Sea, their
    positions in international fora. We see them apply pressure to
    their partner countries in those instances, and certainly the
    Pacific Islands could be susceptible to that as well.
        Miss Gonzalez-Colon. Does the United States currently have
    any plans to build any additional U.S. military facilities on
    those Freely Associated States?
        Mr. Schriver. We are, I think, in a process now of
    reviewing plans and reviewing posture. I think we are grateful
    for the opportunity to have these relationships that give us
    options. As we look at the logistical needs, the access needs
    for contingency planning, we will certainly be in consultation
    with our partner countries on those issues.
        Miss Gonzalez-Colon. Thank you.
        Mr. Pula, one of the main issues is you have got a lot of
    experience in the Department of the Interior in the
    renegotiation of the Compacts and the renewal of one of them.
    In your experience, what will be the financial impact if funds
    are not continued beyond 2023?
        Mr. Pula. Thank you for the question. As we look at the
    Trust Fund, the current Compact agreement, the funding the
    direct assistance that we provide now for the last 15 years
    until the end of 2023 will end, and then, the Trust Funds will
    kick in. In short, if you look at the balance of the Trust
    Funds, they will not meet the level of the current aanual
    funding that goes to both RMI and the FSM. Of course, that all
    depends on how the market does regarding the Trust Funds. So,
    to answer the question, there are gaps. The RMI's Trust Fund is
    a little better. The FSM has a larger gap. And we hope, when we
    get there, as was mentioned by my colleague from the State
    Department, Secretary Pompeo had already announced
    renegotiation. So, in that sense, those are some of the things
    that the Administration is working together on to figure out
    how we can help in this process going forward beyond 2023.
        Miss Gonzalez-Colon. You are the Chair of the Trust,
    correct?
        Mr. Pula. Yes, I am.
        Miss Gonzalez-Colon. And being the Chair of the Trust, is
    any oversight currently in place to that trust? Any review of
    the processes there that you can share with us?
        Mr. Pula. OK, I am sorry, can you----
        Miss Gonzalez-Colon. You are the Chair of the Trust?
        Mr. Pula. Yes.
        Miss Gonzalez-Colon. My question is, if the Department of
    the Interior is doing an oversight of the Trust, as we speak?
        Mr. Pula. Right. The way the Trust Fund is set up, we have
    three members from the U.S. and two members from both the RMI--
    --
        Miss Gonzalez-Colon. Do you have the money to run the Trust
    right now or not?
        Mr. Pula. Oh, do we have a manager?
        Miss Gonzalez-Colon. Yes.
        Mr. Pula. Yes, we hire financial folks that help us on a
    daily basis, yes.
        Miss Gonzalez-Colon. In that experience--and I know my time
    is running--but what detailed assessment of what stays and what
    may go away if the Compacts are not renegotiated?
        Mr. Pula. Well, I can say this: the Trust Funds will not be
    enough in terms of the funding. Like I said, that is something
    that we are sort of like discussing how to help. The portfolio
    itself or the Trust Funds of both FSM and RMI are sort of
    diversified based on the markets. But, at this point, we hope
    that it will work toward----
        Miss Gonzalez-Colon. And if you can provide it for the
    record later on, what recommendations specifically for the
    renewal or the agreements you may ask from these Committees?
        Having said that, I will yield back.
        Mr. Sherman. Thank you.
        Now I will recognize the gentleman.
        Mr. Sablan. Thank you. Thank you very much, Chairman
    Sherman.
        I am going to have some questions that I would ask the
    witnesses to respond in writing. I do not have enough time. But
    let me start.
        Secretary Schriver, you testified before the Senate Energy
    and Resources Committee 2 months ago that the Administration,
    quote, ``strongly supports extending Compact financial
    assistance''. End quote. But the source of funding was not
    answered at that hearing. Today, you testify again that the
    Administration strongly supports extending Compact financial
    assistance to secure long-term U.S. strategic interests in the
    region. So, in this intervening 2 months, has the
    Administration identified a source of funding?
        Mr. Schriver. We do not have a final answer on that, but
    the work has continued, work with OMB and our interagency
    colleagues, to identify our proposal that we would bring to the
    Congress to accomplish that.
        Mr. Sablan. Yes, thank you. That is good because we would
    not want to have a repeat of what happened with the Republic of
    Palau, where it took 7 years to get Congress to approve it.
        Secretary Oudkirk--I hope I got that right, Sandra--thank
    you very much for the visit recently; also, for the briefing
    for one of my meetings.
        But Compact extensions must be enacted into law, as we did
    with the Palau Compact in 2017 with Public Law 115-91. That
    implies getting congressional buy-in as the Compacts are
    negotiated. Do you agree?
        Ms. Oudkirk. Yes, sir.
        Mr. Sablan. So, Secretary Pompeo has announced that
    negotiations are beginning with the Federated States of
    Micronesia. I hope we can count on the Administration to
    cooperate and communicate fully with the Committees as these
    negotiations progress. May I have your commitment to do that?
        Ms. Oudkirk. Yes, sir. And just to clarify, we have begun
    consultations. We do not yet have a negotiating mandate.
        Mr. Sablan. Thank you. And I know you have a lot on your
    plate. So, any idea who will be conducting these negotiations?
    And I ask this question because the Palau Compact extension was
    handled by a State Department career officer; whereas, the
    previous FSM and Marshall's negotiations were handled by
    special representatives of the President. And this is important
    because the negotiator must be able to get commitments from
    other Federal agencies like the Postal Service, FEMA, FAA,
    FDIC. The negotiator has to have clout and must be able to
    speak for the President, right?
        Ms. Oudkirk. Yes, sir. So, right now, we are in the
    consultative process. We are working to determine who the
    negotiator will be. We have not made a determination on that
    yet, which is why I would draw a distinction between the
    consultative period that we are in now--we are listening; we
    are asking questions; we are trying to draw lessons learned. We
    are not actively negotiating the extension.
        Mr. Sablan. Thank you. But, within the lines, I was just
    making a suggestion. I hope you take that into consideration.
        And a basic element of the 2003 Compact was setting up
    self-sustaining Trust Funds to replace annual grants. GAO
    reports that the Trust Funds are unlikely to meet that goal.
    So, is it going to be one of your goals in negotiating Compact
    renewals to adequately capitalize these Trust Funds, so they
    can replace the annual grants?
        Ms. Oudkirk. So, Mr. Congressman, just as we are hoping to
    consult with you and take your advice on how to best configure
    our negotiating team and what our goals and objectives should
    be in undertaking this step, which does have a long and far-
    reaching impact, we are also looking to gain lessons learned
    from our colleagues at GAO, from colleagues throughout the
    interagency, and our negotiating partners, the governments of
    the three Freely Associated States, the people living in those
    countries, to set objectives, and then, to negotiate toward a
    goal that provides the most benefits for the most reasonable
    cost.
        Mr. Sablan. Yes. So, I do not doubt, as both you and
    Secretary Schriver have said that you do understand, that there
    are powers at work in the Pacific and that they will step in
    and offer economic support if the United States gives up the
    field. So, Secretary Oudkirk, how about the--my time is up, Mr.
    Chairman.
        Mr. Sherman. Without objection, the gentleman will be
    granted another minute.
        Mr. Sablan. Thank you.
        A very important issue for me, Secretary Oudkirk, the
    Special Education Grant that replaced many Federal education
    programs, that grant was not made a permanent appropriation and
    has never been full-funded. What is your plan for making sure
    education gets reliable funding when this is negotiated, when
    the renegotiation happens? And this is important because, as I
    always say about the Marianas and everywhere, education is the
    key to future prosperity and well-being for the individuals at
    this site. So, we have to make sure that education is funded.
    Would you agree with me on that?
        Ms. Oudkirk. The State Department shares your concern and
    support for a well-educated population as the foundation for
    democracy, though I will defer on the specifics of the special
    education funding to my colleagues from either DOI or GAO, or
    we can take the question back.
        Mr. Sablan. Right. This should be, also, in negotiating.
    Right now, schools in the Freely Associated States or in the
    Federated States of Micronesia are closed at noon because there
    are no school meals. And you cannot educate, fully educate,
    students if you are only a half-day in session.
        Thank you, and I yield back, Mr. Chairman. I will have
    questions for the record.
        Mr. Sherman. Thank you.
        I will now recognize the gentlelady from American Samoa.
    Then, I will recognize myself for questions.
        Mrs. Radewagen. Thank you, Mr. Chairman.
        So, this question is for the panel. The administration of
    the FSM and RMI Trusts has been cumbersome and unnecessarily
    contentious with joint U.S. Insular Management Committees
    provided for in 2003. The 2010 Palau Compact extension is more
    efficient, but not less effective with Insular ownership and
    management within U.S. guidelines. Is there any reason not to
    replicate the Palau model in laws regarding the FSM and RMI?
    Secretary Schriver?
        Mr. Schriver. With your permission, I will defer to my
    colleagues who have more direct responsibilities for those
    matters.
        Mr. Pula. All right, I will take it. The Palau model is a
    sinking fund, their Trust Fund. So, it basically kind of ends.
    The RMI and FSM model that kicks in after 2023 is hopeful, and
    I want to emphasize and underline that, to be a perpetuity kind
    of fund. As a matter of fact, I had heard--of course, I could
    not confirm--that Palau is kind of interested in looking at the
    models of FSM and RMI in that extent.
        So, right now, the way that the Trust Funds for the FSM and
    RMI are set up, once the funding is picked up, still the
    committees, both the Trust Fund committees in both countries,
    still have to make some decision based on the current law. And
    some of the changes, I think, that the countries would like to
    do in order to help moving forward after 2023 is part of some
    of the discussions that we are going to be having with the
    countries as we move forward.
        Mrs. Radewagen. Secretary Schriver, the RMI is home to the
    Ronald Reagan Ballistic Missile Defense test site on Kwajalein
    Atoll. When Army General Martin Dempsey, former Chairman of the
    Joint Chiefs of Staff, visited the area, he called Kwajalein
    the world's premier range and test site for intercontinental
    ballistic missiles and space operations support and noted that,
    quote, ``There are a lot of things we do here because of where
    we're located that we cannot do anywhere else in the world.''
    Could you please describe the importance of Kwajalein to the
    United States?
        Mr. Schriver. It is critically important, and I would
    certainly associate myself with General Dempsey's comment. It
    has the unique features of that access, but also its geographic
    location, which does make it ideal for the ballistic missile
    defense testing. If you want to simulate trajectories and where
    our interceptors would be fired from, it is absolutely ideal.
    There are other research and development projects that are
    conducted there, and I mentioned in my opening remarks the work
    on hypersonics. And there are a number of tests coming up. So,
    it remains a critical facility which we highly value.
        Mrs. Radewagen. Thank you, Mr. Chairman. I yield back.
        Mr. Sherman. Thank you.
        Mr. Assistant Secretary, as Ms. Oudkirk testified, we have
    the right to exclude military action from other States, but
    they can just call it space or call it something else and say
    it is not military. China had its space tracking station
    looking at our missile tests. Do we anticipate China trying to
    reestablish such a space tracking station and should we be
    concerned?
        Mr. Schriver. I have not seen any specific reporting about
    future intentions, although their ambitions in the space area
    are quite robust. So, I think it is----
        Mr. Sherman. But do you think--you know, we do missile
    testing in the area.
        Mr. Schriver. Yes.
        Mr. Sherman. Is the Department of Defense concerned having
    the Chinese monitor that from this territory, the Marshall
    Islands?
        Mr. Schriver. Certainly anyplace where they can advantage
    themselves for that kind of collection we would be concerned.
        Mr. Sherman. So, they can do a better job of monitoring
    than they could from just sending a ship there? Does having a
    land base enhance their ability?
        Mr. Schriver. Potentially. There are technical details that
    I----
        Mr. Sherman. Please take a look at that.
        Mr. Schriver. Yes.
        Mr. Sherman. We have talked a lot about the need to fund
    our efforts. The biggest pot of money is the defense budget. It
    is, on the one hand, the current system we have has a lot to
    speak for it, but if it is just a matter of getting the money--
    and I am not talking about changing who does the work--could
    the Pentagon support the idea that the cost of the Freely
    Associated State Compacts, et cetera, come in the defense
    budget?
        Mr. Schriver. We are engaged in that discussion internally.
    I think there are some questions about the expertise for
    programs such as education and health that we do not have----
        Mr. Sherman. Trust me, you will give the money over to Mr.
    Pula.
        [Laughter.]
        Mr. Schriver. Yes. Of course, we have a number of programs
    that do benefit directly, the local population, I mentioned the
    radar facilities in Palau.
        Mr. Sherman. Right, but I am not talking about who spends
    the money. I am talking about getting the money for this
    important service. I mean, just by way of insight, I think the
    biggest funding for breast cancer research is in the military
    budget. If you want to do something good for the country or the
    world, you put it in the military budget. So, I hope that you
    would continue to pursue the idea that the money would be the
    military budget, but would immediately be transferred to State
    for what they are doing, to Interior for what they are doing,
    and, of course, for what you are doing. This is too important
    to our national defense to say, well, it was a good idea for
    our national defense, but we could not find any money in the
    Interior budget, so we did not do it.
        Ms. Oudkirk, cryptocurrency is something that the Marshall
    Islands is looking at. I had a chance to talk last May with
    President Heine and urge her not to go down that road. I serve
    on the Financial Services Committee. Our Chair has echoed the
    words of President Trump that this is a very bad road to go
    down. What is the State Department doing to discourage the
    Marshall Islands from adopting what is being called a sovereign
    cryptocurrency?
        Ms. Oudkirk. Sir, with your permission, I will take that
    question back.
        Mr. Sherman. OK.
        But if you look at the policy of the government, both on
    the Democratic side and the President, this is a huge risk to
    our national security. As important as what the Defense
    Department does, a lot of our power comes not from his ships,
    but from our ability to control the world financial payment
    system. Our sanctions, for example, rest on that. And you
    should not allow something under an entity that you are
    coordinating with to undermine that without making it a major
    concern.
        Ms. Oudkirk. Yes, sir, completely understood, and it is
    also a very technical issue and one where the Treasury
    Department----
        Mr. Sherman. It is not that technical. You just say, ``It
    is critical to the United States that the Marshall Islands not
    go down the road of a sovereign cryptocurrency. We do a lot for
    you. We are going to do more, especially when we put it in the
    Defense Department budget. Please do not do this.''
        [Laughter.]
        And finally, climate change, are we addressing climate
    change and what risk does this pose to the FAS?
        Ms. Oudkirk. Sir, I had the honor of accompanying Secretary
    Bernhardt to the Pacific Island Forum in Tuvalu last month.
    Climate change was an absolutely top priority for the Pacific
    Island States there. Secretary Bernhardt was very eloquent in
    describing all of the work, the U.S. approach to the climate
    issue, and all of the work that the United States does from
    NOAA, the Coast Guard, FEMA, and others, to deal with the
    issues of resilience and adaptability. This is an issue that is
    of absolute importance to our partners in the Pacific, and it
    is important that we engage with them and explain our approach
    and the many things and the many programs that we have across
    the region to work on adaption and resilience and handling
    extreme weather, making weather predictions, et cetera.
        Mr. Sherman. My time is expiring. I will simple say that,
    if we emitted less carbon and less methane, perhaps that would
    help as well.
        And I will ask you to respond for the record about Chinese
    efforts to influence the internal politics of the Freely
    Associated States.
        And with that, we will recognize Mr. Yoho, the gentleman
    from Florida.
        Mr. Yoho. Thank you, Mr. Chairman.
        I appreciate you all being here.
        Since post-World War II, the Indo-Pacific region has been
    considered open and free and passable by all. Not until
    recently have we seen this aggression from China, and it is
    disturbing to see how aggressively they are. And then, through
    their coercion and intimidation, we see what they are doing
    with other countries, offering a pot of money with hooks to it,
    you know, the predatory lending reminiscent of our robber
    barons of the 1800's.
        What people need to understand--and I think this
    Administration has shown a strong commitment to the Indo-
    Pacific strategy, you know, with the Freedom of Navigation that
    we have done that was postponed and not performed in previous
    administrations. Is that signal getting out? Are people seeing
    a difference and they are feeling a little bit more confident?
    Mr. Schriver?
        Mr. Schriver. Certainly we hear a lot from allies and
    partners that they welcome our increased presence and our
    increased Freedom of Navigation Operations. We are also doing,
    outside the 12 nautical miles, a lot more joint sails and joint
    patrols with other countries. So, again, we get a demand signal
    and we get statements of appreciate from partners and allies.
    So, I think it is.
        Mr. Yoho. OK. And I have seen other countries step up, as
    you have seen. I have seen Canada say they are going to, and
    the UK, and all these. And those are all positive signals that,
    as a coalition, we are going to make sure that the Indo-Pacific
    region stays open to trade as it has done.
        And there is only one aggressor, and that aggressor, of
    course, as we have heard, is China. People said it is a threat.
    It is only a threat if you are afraid of it, No. 1 and, No. 2,
    if you are unprepared for it. With the tools this Committee
    passed through last year that the President and the Senate--
    that the President signed into law with the bill that created
    the United States International Development and Finance
    Corporation, which is due to roll out in October, are we
    identifying projects and letting the people in those areas know
    that it is different than what the BRI Initiative of China has?
        And, Ms. Oudkirk, you look like you are ready to say
    something there.
        Ms. Oudkirk. Thank you very much, Congressman.
        I think I can speak for the entire Administration in saying
    we are delighted that Congress provided us tools through the
    BUILD Act to enhance our ability to support U.S. business, as
    we put forward a model that competes with that, with the
    closed, secretive model of China's Belt and Road Initiative.
        We are looking forward to something called the Indo-Pacific
    Business Forum, which will be held----
        Mr. Yoho. Right.
        Ms. Oudkirk [continuing]. In early November in Bangkok.
    That Forum will be an opportunity----
        Mr. Yoho. That is in November, is it not?
        Ms. Oudkirk. November 4th, yes.
        Mr. Yoho. And we have representation there?
        Ms. Oudkirk. Secretary Ross is leading----
        Mr. Yoho. Good.
        Ms. Oudkirk [continuing]. A large trade delegation. You are
    all welcome to come.
        Mr. Yoho. I might be there.
        Ms. Oudkirk. And we will have other parts of the
    Administration there as well. But that really is going to be
    the big, public opportunity for us to unveil the implementation
    of the economic side of the Indo-Pacific Strategy. So, the
    various alphabet soup--Asia EDGE on Energy, DCCP on
    telecommunications, ITAN on infrastructure, there is a list of
    projects. Hopefully, there will be signings; there will be
    deals made. It should be a really good follow-on event to the
    event that the Cabinet Secretaries had last summer here in
    Washington at the U.S. Chamber where they unveiled the Indo-
    Pacific----
        Mr. Yoho. OK. Let me go ahead and interject here. Because
    you guys are the boots on the ground; you are the ones that are
    the face of America. You can only do what we do as far as
    creating tools and use those tools, but I hope the message gets
    out clear.
        We talk a lot about the military strategic importance of
    that area, which it is. It is vital, but more so for an open
    and free trade area. And then, the emphasis needs to really be
    put on the people of those areas, because that is really the
    resources that are so important. Yes, it is important
    militarily and strategically, but it is important for the
    people of those areas. And that is where we should put our
    emphasis.
        And I am reading your notes, Ms. Oudkirk. You were talking
    about the amount of tourism that China was going in there, and
    it boosted their economy up a bunch. But China got upset
    because they were not recognized. And so, they told everybody
    do not go there. This is the coercion they are going to use
    over and over and over again that we do not do. And I hope that
    message gets out and that you use the tools available.
        And real quick--am I over? I am over? No, still going. I
    was looking at the wrong red button.
        One of the other things I wanted to ask you about--and I
    think this is for you, Mr. Pula--you were talking about the
    different Trusts, FSM and the RMI. The other ones, are those
    sovereign wealth funds? If not, can they be converted to those?
    And if so, what would you need? Is that something we need to
    do?
        Mr. Pula. Those are not sovereign wealth funds.
        Mr. Yoho. Can we create a vehicle like that?
        Mr. Pula. That is something we can look into.
        Mr. Yoho. I would sure like to look at that.
        And then, Ms. Oudkirk, you were talking about there are
    three Ambassadors to that area, that those areas have full
    diplomatic recognition. Others are by the Interior Department,
    correct? Is there a way that we could strengthen that and have
    them to have full diplomatic recognition? And you can submit
    your answer to the record because I am out of time.
        Mr. Sherman. I will just comment that the United States
    also, like China, does use our economic power, economic power
    that I hope is not undermined by Marshall Islands sovereign
    cryptocurrency.
        The gentleman who has been here from the very beginning,
    further from me geographically in this room and from the area,
    but he has been here from the beginning, the gentleman from
    California.
        Mr. Bera. Thank you, Mr. Chairman.
        Yes, I agree with a lot of what my colleague from Florida
    just talked about. And I think the issue of maritime
    sovereignty, maritime strength, the issue of Taiwan having
    visited multiple times is absolutely bipartisan and reflects
    the values of the United States in terms of freedom of
    democracy, freedom of choice, free markets.
        Obviously, I think many of us on this Committee have been
    very concerned with China's overreach and lack of respect for
    that maritime sovereignty and rule of law, and certainly was
    critical of the Obama Administration in their lateness in
    acting on the South China Sea, but I also applauded their
    decision to start the Freedom of Navigation Operations as well.
        Assistant Secretary Schriver, under your leadership, the
    U.S. has increased the pace of those operations, but at this
    juncture what I think many of us feared was China establishing
    that foothold in the South China Sea and gaining some
    confidence in that. As they start to think about the second
    island chain, and so forth, how do you think this changes the
    calculus from the Chinese perspective, given where they were
    with the first one?
        Mr. Schriver. I suspect they are evaluating our response,
    our actions, and those of other partners, based on what they
    did with the buildout of the outposts in the South China Sea,
    the deployment of military systems, and now seeing how
    countries are reacting to that, first and foremost the United
    States. We have increased Freedom of Navigation. We have more
    joint patrols, joint sails with other countries. We are
    increasing our capacity-building. Another program we have to
    assist countries in the maritime is the Southeast Asia Maritime
    Security Initiative, where we help with their ability to sense
    and see and contribute to maritime security.
        So, I hope what they see is a response that is really
    counterproductive to what China's ultimate aims are. They would
    be far better off pursuing their interests through peaceful
    means and allowing that area to remain free and open, and not
    try to change the qualitative nature of it. Because we are open
    to having a free and open Indo-Pacific that benefits all,
    including China. But if one country tries to change
    international law, then we will get a strong response.
        Mr. Bera. Well, thank you for that update. Certainly there
    is a lot of support. I cannot speak for every member of this
    Committee or this body, but I think most of us, if I listen to
    the comments, fully support that increased presence and sending
    that signal to China that they can have a prosperous future as
    well, but you have got to have the rule of law and the rule of
    the open seas.
        Either Assistant Secretary Schriver or Ms. Oudkirk can
    answer this next question. We have a close relationship with
    other nations who play a major role in supporting the Freely
    Associated States. Australia and New Zealand are part of our
    Five Eyes, you know, our closest relations, but Japan also has
    a relationship. I would just be curious if you could give us an
    update on how Australia, New Zealand, and Japan are also
    supporting the Freely Associated States.
        Ms. Oudkirk. So, I will take the non-military aspects of
    that. We work very closely with development partners. I would
    say Australia, New Zealand, Japan, India increasingly has shown
    an interest, and Taiwan for its diplomatic partners. We work to
    ensure that our assistance programs, whether they are on the
    soft side, you know, training programs, or on the more delivery
    of assistance are coordinated, that they do not duplicate, that
    they do not create gaps.
        This is an effort that we have broadly across the Pacific
    in support of the various strategies, our Indo-Pacific
    Strategy, the Australian Pacific Step-Up. And so, that is
    something that is ongoing and it is the subject of constant
    diplomatic engagement.
        Mr. Bera. Great.
        Mr. Schriver. If I could just add briefly, Secretary Esper
    took his first trip as confirmed Secretary to the Indo-Pacific,
    and he included Australia and New Zealand, the first Secretary
    of Defense visit to New Zealand since 2011. It was not only to
    invest in that relationship that is important, but it was to
    talk about the Oceania region.
        As my colleague mentioned, Australia has a Step-Up program.
    New Zealand has the Reset. So, we are talking about how we can
    be partners together in protecting the sovereignty and
    increasing capacity in this area.
        On the DoD side, we have specific projects throughout the
    Pacific Island region. There is work going on in the PNG that
    we are doing with the Australians about a particular base.
    There is work in Fiji, where the Australians have worked on the
    peacekeeping training facility and we are doing the training.
    So, it is expansive throughout the region, and it is really a
    way to leverage the like-minded nature of those close
    alliances.
        Mr. Bera. Great. Well, thank you for that. And again, for
    the Chinese that would be watching this, this is an important
    region.
        Mr. Sherman. I now recognize the gentleman from Tennessee.
        Mr. Burchett. Thank you, Mr. Chairman, members.
        This area actually holds a little bit of history in my
    family. My father was in the United States Marine Corps and
    fought on the island of Peleliu. So, some of these islands
    are--he and my mom are both in heaven, but they were wonderful
    people. And daddy went back for the 50th anniversary of the
    invasion of Peleliu, and they treated him like royalty and it
    was one of his fondest memories.
        And I remember my mama was there for about 30 minutes and
    she slipped on some coral and busted her head open, and my dad
    made a joke about how that he was there for, I think, 20-
    something days in combat and never got a scratch and mama was
    there 30 minutes and she got a Purple Heart. And the Navy
    surgeon, actually, after my mom and daddy both died, I was
    going through some stuff, and the Navy surgeon actually wrote
    my parents a very nice letter just how memorable it was.
        And daddy, one of the greatest, I guess, disappointments of
    his life was, after the war, they went to China, actually, and
    were escorting the Japanese soldiers off the island because the
    Chinese were killing them. But daddy had a real love for the
    Chinese folks and he hated the fact that we, in his words, ``We
    turned them over to the communists.'' And he said they could
    have been one of our greatest allies and we blew that.
        But, anyway, my question really has to do with, if China
    tried to coerce any of the Freely Associated States, the FAS,
    to switch their diplomatic relations from Taiwan to mainland
    China, could our defense veto or the right of strategic denial
    prevent this? And if any of you all could answer that, that
    would be fine. Thank you all so much.
        Ms. Oudkirk. OK. Thank you very much, Congressman. I will
    address the issue of sort of Taiwan's diplomatic partners.
        So, we were very disappointed in the decisions of the
    governments of the Solomon Islands and of Kiribati last week to
    switch recognition. We do believe that, as I said earlier, the
    status quo situation across the Straits is a situation that has
    enabled peace and prosperity in the region for decades.
        We believe that countries who choose to recognize China in
    the hopes that it will provide economic benefits or
    concessionary loans ultimately will be disappointed, as have
    many other countries who have taken out those loans for other
    reasons, once they realize the terms of the loan. I think when
    we look at China's Belt and Road Initiative, we see that it is
    a program by China for China.
        And kind of to answer a little bit of the question that I
    got earlier, the wonderful thing about U.S. deals and U.S.
    investment around the world is that investment is led by U.S.
    companies. It is made on commercial terms. We deeply appreciate
    the support that Congress has given us through the BUILD Act
    and other economic tools that will help us support our private
    sector. But, at the end of the day, it is the private sector
    that needs to lead, and that is what makes us different from
    China.
        Mr. Burchett. Any others just want to comment on that?
        Mr. Schriver. I certainly agree that we were disappointed
    by the decision that those countries made. I think we
    underscore the unique aspects of our defense relationship with
    the Freely Associated States, so that there might be even
    additional costs if they were to make a similar choice. But
    they are certainly under pressure. And so, one of the reasons
    we at the Defense Department talk about the economic aspects of
    our Compact, seemingly an economic issue, not a defense issue,
    is that it is really the comprehensive relationship that keeps
    them, I think, more aligned with us on a range of things, to
    include the security challenges associated with China.
        Mr. Burchett. Thank you all very much. I hope that we can--
    a lot of lives were lost to secure that security. Although it
    is mainly on the History Channel now, it lives in me. My daddy,
    as I stated, he never got a scratch hardly. His were all
    internal. As a little boy, I can remember, even until the day
    he died, when I would wake him up, I would never go over the
    top of him. I would grab him by his toe because I really did
    not know where he was when he woke up. And he was an incredible
    human being.
        And so, thank you all so much for what you do. Thank you.
        Mr. Sherman. I would point out to the Committee that I am
    working on legislation to try to identify China debt trap debt
    instruments and encourage countries simply not repay without
    hurting their international credit rating.
        With that, I will recognize the gentlelady from
    Pennsylvania who has been here the longest in this room, if not
    the longest in Congress----
        Ms. Houlahan. No, not so long.
        Mr. Sherman [continuing]. For 5 minutes.
        Ms. Houlahan. Thank you. I appreciate it.
        And it is nice to see you again, Assistant Secretary
    Schriver.
        My first question is for you and Mr. Pula as well. We
    talked a little bit about climate change. And I was wondering
    if you might, or anybody, comment on the implications possibly
    on the migration of people and whether or not that has any
    implications to national security and, also, to trade as well.
    I am particularly interested in, if people are leaving, what
    sort of void does that leave behind in terms of national
    security and, also, trade?
        Mr. Schriver. Thank you.
        We at the Department of Defense have cited climate change
    and the impact as having a national security impact, and that
    is true in the region of the Pacific Islands and the Freely
    Associated States. Most of our efforts are on shoring up the
    resiliency of our facilities there, like the facility we spoke
    about at Kwajalein.
        The issues associated with migration in the Freely
    Associated States are unique because of their ability to travel
    to the United States. But, potentially, migration could leave
    both access opportunities for adversaries and it could lead to
    other humanitarian situations where the Department of Defense
    has a supporting role. So, it is something, again, that we have
    reported on and been very public about our concerns, and we do
    have a role in responding to that.
        Ms. Houlahan. Mr. Pula.
        Mr. Pula. Thank you for the question.
        On the climate change, I had the privilege to accompany
    Secretary Zinke last year to the Pacific Island Forum in Nauru.
    As we all know, the small island nations in the Pacific are
    very big in the climate change issue. I recall correctly
    Secretary Zinke's point to the reporters, when the question of
    climate change was asked, he said, the United States has been
    doing its part in terms of lowering CO2 levels, working on the
    climate change. ``You might want to ask those questions to
    China and other countries.'' So, I think with this
    Administration, they have been working hard on resiliency and
    all that, as we engage, also, with the folks in the Freely
    Associated States, as well as our other friends in the Pacific
    Island countries.
        With the migration part, again, just yesterday on my way
    back from Honolulu, I sat next to a 3-year-old and mother on
    the plane from Chuuk who were traveling to Nevada. I was
    talking to the mother and I was surprised. They said they were
    on their way to Denver to visit some families.
        I guess the point I am trying to make is, with folks from
    the Freely Associated States traveling to the United States,
    some of whom live here--some of them go back in the migration.
    But connecting with the climate change issue, I think with the
    Marshall Islands, the President of the Marshall Islands has
    spoken at the U.N. and other areas because of the low-lying
    atolls. These are issues that the Administration is aware of
    and we have been dealing with as much as we can, and as we
    speak to our friends and colleagues from FAS.
        Ms. Houlahan. And some of the legislation that I helped put
    forward actually has to do with asking our State Department to
    be more involved in helping other nations to meet their Paris
    Climate Accord agreements as well. And so, it is critical, this
    issue of climate change, and I do believe it has implications
    to national security in that particular area of the world.
        I only have a minute left, but I was wondering, I know Mr.
    Burchett talked a little a bit about the issues of Belt and
    Road. You all talked about that as well. Can you specifically
    speak to Vanuatu and Samoa in terms of the concern, if any,
    that you have in terms of China coming in for developing a
    port, and whether or not we are doing the right things and
    enough things to invest in that area? I only have about a
    minute left.
        Mr. Schriver. Starting with the port, there has been public
    reporting of the Chinese involvement in building out a port in
    Vanuatu. Interestingly, there was public backlash in Vanuatu
    about the suspicions that the port and the pier, in particular,
    would be used not just for commercial purposes, but potentially
    host military vessels. So, that backlash led to clarifications
    from the government there that they are for commercial
    purposes, but that can change in the future. So, we are
    concerned about that.
        I think we are engaging Vanuatu in ways to demonstrate that
    we can be a preferred security partner. I traveled there with
    an interagency team, including Coast Guard colleagues who
    talked about their law enforcement needs and the interests in
    protecting their sovereign territorial waters from illicit
    activity. And so, we are trying to use the tools available to
    us to show that we can be the preferred partner.
        Ms. Houlahan. Thank you. I have run out of time. I yield
    back.
        Mr. Sherman. Recognize the gentleman from Hawaii.
        Mr. Case. Thank you, Mr. Chair.
        And I would like to start out by following up on your
    comments about our new Pacific Islands Caucus, which is a
    first-ever congressional caucus focused on the Pacific Islands,
    roughly 24 jurisdictions across the entirety of the Pacific
    Islands that are all integral to the future of not only the
    Pacific, but the Indo-Pacific and our country. And so, we
    welcome the community here and all those listening.
        Mr. Sherman. If the gentleman will yield, I want to praise
    you for coming up with the idea and getting us organized in
    creating that caucus. I yield back.
        Mr. Case. Well, thank you very much. The members on the
    dias, most of us are members and all of us are very interested
    in this. So, we welcome your suggestions on how to fully engage
    on these subjects with the Congress.
        This is to the three members of the Administration here. We
    have got three separate departments here. I support the
    Compacts. I support our relationship on a number of levels,
    whether you want to talk about trust responsibilities that go
    back generations to shared support of friends with shared
    values, to our military aspects of mutual defense. However, the
    impact of the Compacts thus far on specific jurisdictions in
    our country are not acceptable anymore. And I speak primarily
    of the locations where the Compact migrants come to. These are
    Guam. These are CNMI to some extent, certainly Hawaii, and not
    just restricted to those. For example, Arkansas has a large
    Compact population. And there is virtually no compensation to
    us for the price of welcoming those migrants to our
    jurisdictions.
        We welcome them. We have an incredibly strong and growing
    community of Compact country migrants in Hawaii, maybe 20,000,
    somewhere in that range when you count those that have become
    American citizens.
        However, the cost to Hawaii is probably somewhere around
    $300 million-plus today. That is a State expense, a State
    expense. The GAO is studying this right now, correct? You are
    engaged in a study commissioned by the Senate which I strongly
    support to actually update the calculations, which at Fiscal
    Year were roughly $148 million for Hawaii in the areas of
    health and education, but also other areas.
        Now we just cannot accept that anymore, because I suspect
    that cost is going to accelerate because we are going to have
    an increasing number of migrants from the Compact countries if
    the Compacts continue, as I hope they do. And the cost per
    person is probably going to accelerate, too.
        So, the attitude and the response--and I was here in
    Congress the last time the Compact came to Congress for
    approval, and I regret that we did not make more of an issue of
    it at the time. At the time, we sought to double the Compact
    impact aid paid from, I think it was $15 million to $30
    million, which was nothing.
        Now we review our obligation as accepting the Compact
    migrants. However, the attitude of the Administration was we
    will negotiate the Compacts, and the actual impact on the rest
    of the country and specific jurisdictions like Hawaii is not
    our business; we are just going to negotiate the Compacts. And
    I am saying it is your business. I am asking you to acknowledge
    that this is your business. And I hope that you will strongly,
    as you get into these negotiations, for all of the
    jurisdictions that bear a disproportionate result from the
    migrants, that you will make that your business, and not just
    say, ``Well, Congress, we negotiated these here. Here are the
    Compacts for approval, and by the way, it is up to you to
    determine how to fund the Compact impact.'' So, it is not going
    to be OK with me, I can tell you that, and I think that is
    probably true of other Members that represent these
    jurisdictions.
        So, I do not need a response from you, but I am just
    telling you this is your business. I hope you will deal with
    it.
        Let's see, I want to talk briefly about the interchange
    having to do with the State Department, Ms. Oudkirk. I had a
    very interesting interchange with a journalist from the Pacific
    Islands. There was a program put on by the East-West Center,
    which is one of our preeminent institutions located in Honolulu
    that outreaches to the Indo-Pacific, invaluable to our
    relationships. And these journalists came in to talk with me
    freely off the record. We had a great discussion. They were all
    from their countries. And I asked them, what is the one thing
    that we can actually do to strengthen our relationships? And
    they basically said it is about relationships, personal
    relationships. And their perception, almost to a person--and
    these are people from across the Indo-Pacific--all felt that,
    basically, China was out-personalizing us in this department.
        Now it strikes me that, yes, of course, we have a
    diplomatic presence, but I would be curious to see what that
    diplomatic presence has looked like in terms of a trend over
    the last 10 or 20 years. I hope it has been going up, but
    probably not.
        And what also strikes me is that a lot of our soft power
    outreach is now borne by the Department of Defense. They do a
    great job in many of these areas, but they should not be doing
    that. It really should be State that is doing this.
        So, I would simply leave you with that comment, that there
    is a significant perception at least that, in terms of the
    development of relationships, we are not doing a good job.
        Thank you.
        Mr. Sherman. Thank you.
        I will now recognize the gentleman from Guam.
        Mr. San Nicolas. Thank you, Mr. Chairman.
        I am going to echo some of the sentiments from my colleague
    from Hawaii, but maybe be a little bit more pointed in so
    doing.
        Mr. Pula, in your response to my Chairman on the Natural
    Resources Committee, when you said that ``it depends'' in terms
    of who you ask with respect to whether or not the U.S.
    investment into the FAS States was sufficient for them to be
    able to reach a level of self-sufficiency. I do not think it
    depends on who you ask. I think it is blatantly obvious that it
    has been an abject failure.
        Not only has the corpus of the Trust not grown to a level
    to meet the need of the funding, not only have the grants and
    technical assistance been sufficient for the areas to be able
    to reach a level of self-sufficiency not to rely on those
    fundings, but both of those funding levels have not even
    factored in the inordinate amount of subsidy that is provided
    by the host regions, to include the territories, the State of
    Hawaii, and the others that were mentioned by my colleague.
        If we had not hosted this level of migration, the corpus
    and the Trust Fund and its growth would be even more under
    water, and the grants that they are receiving would be even
    less sufficient. So, I do not think there is any debate as to
    whether or not the Compact relationship was sufficient or not
    for these areas to be able to reach a level of independence. I
    think it is very, very obvious that it has not.
        On Guam, the population of the FAS residents is more than
    two out of the four States that comprise the FSM. It is over 50
    percent of the entire population of the Republic of Palau, and
    it is over 50 percent of the entire population of the island of
    Majuro that is the largest atoll in the Republic of the
    Marshall Islands. And so, the subsidy that has been provided,
    at least just from Guam, for the Compacts and their lack of
    ability to be able to make up for whatever these areas are
    needing is enormous.
        Not only does the population of the FAS make up almost 10
    percent of the population on Guam, but the Compact impact
    fundings that Guam receives is less than 2 percent of what its
    overall budget is for its annual Fiscal Year operations. We get
    less than 2 percent of the funding in Compact impact for our
    budget, and our population on the FAS is nearly 10 percent. So,
    the subsidy is enormous. And we need to factor all those things
    when we are looking at this on an equal basis.
        Part of the way for us to be able to move away from the
    need for subsidy, in terms of whether it is being done in host
    areas or if it is going to be absorbed by more Trust Funds, is
    to ensure the areas are able to develop to a level that they
    are not going to be having their population moved to areas to
    get subsidized. And it is also to be able to ensure level of
    developments, that we are not relying on Trust Fund moneys to
    subsidize the lack of development. But development is grossly
    lacking in these areas, and I would like to argue due in large
    part to our inability to necessarily expend the resources that
    are provided in a way that is going to facilitate that new
    element.
        And so, I wanted to ask specifically about the Joint
    Economic Management Committee and the Joint Economic Management
    and Financial Accountability Committee. These two Committees
    are responsible for administering the grants that are provided
    to the FSM and the RMI. With respect to all the grants that
    have been provided, is there a balance that is basically
    unexpended in JEMCO and JEMFAC? Mr. Pula?
        Mr. Pula. Thank you, Congressman, for the question.
        Yes, there are balances. It is the funding that we
    provide----
        Mr. San Nicolas. What is the total value of the balances
    right now?
        Mr. Pula. Well, let me say this: we will get that
    information to you. I cannot get it off the top of my head.
        Mr. San Nicolas. Just an estimate, the balances in JEMCO
    that have been unexpended in terms of grants?
        Mr. Pula. Well, for the FSM, because of the infrastructure,
    the slowness of how it went for the FSM, I would say it is over
    $100 million.
        Mr. San Nicolas. Over $100 million in unexpended grants
    that are supposed to help these areas to develop. How about in
    JEMFAC?
        Mr. Pula. In JEMFAC, I would say a few million dollars, not
    as much, and those are like the unused funding in the Sector
    Grants not spent totally, because it is on an annual basis.
        Mr. San Nicolas. If we want to reduce the amount of
    dependence of these areas, we need to make sure the funding
    that we are providing to be able to make them more self-
    sufficient is actually being deployed to encourage that self-
    sufficiency.
        Secretary Schriver, I just wanted to ask real quick, does
    the INDOPACOM strategy factor in a status-quo relationship with
    the FAS?
        Mr. Schriver. If I understand the question, it does assume
    we will continue with that status of Freely Associated States
    and Compacts. If that status were to change, Indo-Pacific
    Command would adapt.
        Mr. San Nicolas. And just to close, Mr. Chairman, the need
    for us to make sure we get the grant deployment right, and the
    need for us to make sure we get these funding levels right, is
    because, if we do not, and the ground changes out there, and we
    have a change in whether or not China is involved, or what have
    you, it is going to cost us exorbitantly more in the
    adjustments that INDOPACOM is going to have to make in order to
    compensate for that.
        Thank you, Mr. Chairman.
        Mr. Sherman. And last, but certainly not least, the lady
    from Virginia.
        Ms. Spanberger. Thank you, Mr. Chairman.
        And thank you to our witnesses who are here today.
        This week at the U.N. General Assembly, President Hilda
    Heine of the Republic of the Marshall Islands emphasized that
    her country could be one of the first to see large-scale
    migration as a result of rising sea levels. I understand the
    Freely Associated States all view climate change and sea level
    change as an existential threat. And my question is, what
    impact, in your view, is this likely to have on the security
    and the stability of the region? And what are your Departments
    doing to plan for these challenges of the anticipated large-
    scale migration? And what do we see as the threat or the
    challenge facing the United States as a result of this regional
    change and challenge? And I will open it up to all of our
    witnesses.
        Mr. Schriver. Thank you. I will just address the security
    aspect. We have identified in the Department of Defense public
    reporting that climate change and its impact is a national
    security threat and that we have a role in addressing that.
    Primarily, we look at the resiliency of our facilities,
    protection of our facilities, and we would certainly put the
    Reagan Ballistic Missile Test facility at the top of that list.
        I think, beyond that, if we get into different scenarios of
    how migration could occur--and we have already spoken about the
    unique status that allows these citizens to come to the United
    States--but there could be potential other humanitarian
    situations where the Department of Defense would be involved in
    a supporting role, logistics, response, et cetera. But it is
    something that we have identified as a concern.
        Ms. Spanberger. Thank you very much.
        Ms. Oudkirk.
        Ms. Oudkirk. So, the United States recognizes that
    addressing environmental degradation and climate change is a
    priority for the Pacific Island State, including the Freely
    Associated States. And this is because of the threat of sea
    level rise and the region's extreme vulnerability to natural
    disasters.
        So, the State Department works with interagency partners to
    support a variety of programs that provide resilience and
    adaptation in the Pacific Islands. This ranges from improving
    drinking water quality and wastewater management to support
    weather forecasting infrastructure, to improve early warning
    and disaster resilience and response. And then, of course, in
    the case of a natural disaster, to provide the immediate
    recovery and response assistance through the Office of Foreign
    Disaster Assistance.
        Ms. Spanberger. OK.
        Ms. Oudkirk. So, this year the U.S. Government pledged
    $36.5 million in new foreign assistance to the Pacific Islands.
    Much of that was concentrated in programs that broadly address
    environmental, climate, or fisheries-related issues. And we are
    committed to continuing to work--we talked earlier about other
    development partners--working with development partners and
    bilaterally to address these challenges.
        Ms. Spanberger. So, I appreciate the focus on some of the
    preventative things that we are doing to ensure that we are
    mitigating challenges, but if we are working toward a place
    where this threat is recognized as the threat of sea level
    change will lead to large-scale migration, specific to the
    challenge potentially of large-scale migration, do you have any
    comments on what we, as a country, have been doing to either
    help with that threat, and then, how it might impact us?
        Ms. Oudkirk. I defer to DOI on migration because of the
    unique FAS relationship.
        Ms. Spanberger. Yes. Thank you.
        Mr. Pula. I do not want to take that question.
        [Laughter.]
        Congresswoman, thank you. But I do want to come back just a
    little bit to my friends, the Congressman from Hawaii and also
    from Guam, regarding the Compact impact. I know that is----
        Ms. Spanberger. As it relates to migration?
        Mr. Pula. Yes, migration.
        Ms. Spanberger. OK.
        Mr. Pula. Because a few years back Governor Abercrombie, I
    went over there to Honolulu, gave him a $10 million check. He
    looked at me. He threw it on the ground and said, ``Nik, this
    is not enough for what the State of Hawaii gave out.'' So, I am
    well aware of the brunt for years now since the Compact began.
        The migration part_because it is allowable in the Compact
    for the folks in FAS to travel freely without visa, they do
    come and go back. They do not always come and just stay as
    population grows. There are some areas, of course, where the
    population is kind of decreasing because they are leaving, and
    I think a lot of them are coming not necessarily because of
    climate change, but because of seeking for a better future--
    schools and jobs, and what not.
        But in our Department, we try to do our best with technical
    assistance whenever our friends from the Freely Associated
    States ask for things. For example, we fund quite a bit of
    outside islands of the Marshall Islands, these reverse-osmosis
    machines to help with the flooding, sea level, and all that.
    But, primarily, of course, the issue, as we all know, is much
    bigger than we all can handle.
        Ms. Spanberger. Thank you for your answers. I am out of
    time. I yield back.
        Mr. Sherman. Thank you.
        I want to thank this panel for joining us. We will now
    empanel the next panel consisting of the Ambassadors from the
    Marshall Islands and the Federated States of Micronesia.
        While people are standing up and sitting down, I will put
    in a plug for a hearing of the Asia and Pacific Subcommittee in
    the fourth week of October. We are going to focus on human
    rights in South Asia, and those concerned with the Indo-Pacific
    region I think will find that interesting. There has been a lot
    of interest in human rights in South Asia.
        I know Mr. Cox, and people may think I am skipping the
    gentleman from California. I have been informed that he did not
    want to ask questions of the first panel. If I am wrong, I will
    bring them back. OK.
        So, we will concentrate on human rights in South Asia after
    we return from this recess.
        I will now turn over the chair to Kilili Sablan, the
    gentleman from the Northern Mariana Islands, who, on behalf of
    the Natural Resources Committee, will chair the portion of this
    hearing with the second panel. Thank you.
        Mr. Sablan [presiding]. Thank you.
        And good afternoon, everyone.
        That was a good hearing. I actually had over a dozen
    questions that I could not ask, but I will ask for the record.
        At this time, I would like to recognize and welcome His
    Excellency Gerald M. Zackios, Ambassador to the United States
    from the Republic of the Marshall Islands, and, of course, His
    Excellency Akillino Susaia, Ambassador to the United States
    from the Federated States of Micronesia.
        And so, I would start with Ambassador Zackios, please. You
    have 5 minutes, and the light turns green when it starts. When
    it goes orange, you have a minute remaining, and when it goes
    red, of course, your 5 minutes is up.
        Please. Thank you.

     STATEMENT OF HON. GERALD M. ZACKIOS, AMBASSADOR TO THE UNITED
            STATES FROM THE REPUBLIC OF THE MARSHALL ISLANDS

        Ambassador Zackios. Chairman Sablan, distinguished leaders,
    and members of the Committees, thank you for this meeting. It
    is very timely. President Heine would have been here if she
    could, but matters of State required her attention. She conveys
    a warm ``yawk-way'' and appreciation to the Committee.
        Since you have our full statement, I am going to highlight
    its key points. The first is that, during the years of U.S.
    administration on our islands, we came to feel, as President
    Reagan promised in advocating for Compacts of Free Association,
    ``You will always be family to us.'' We are proud to enable
    U.S. control over a strategic expanse of the Pacific larger
    than Texas, including shipping lanes coveted by other nations;
    to be the location of what the Joint Chiefs have described as
    the world's premier range and test site for ICBMs and space
    operations; to be a U.N. member second only to Israel in voting
    with the United States, and to have a higher rate of enlistment
    in the U.S. military than most U.S. States.
        The Trump Administration and many in Congress from both
    parties want to continue our free association long beyond 2023.
    The RMI's current government does, too. The biggest potential
    threat comes from the financial influence of China, as has been
    shown in other Pacific Islands. For example, our government was
    challenged by a Chinese proposal to build a port and 1,000
    homes on Rongelap in return for its autonomy from our
    government.
        A pivotal issue is that the Trust Fund, established by the
    2003 Compact amendment to replace annual U.S. grant assistance
    after Fiscal Year 3, will not have enough money, despite good
    returns. It is critical that the Trust Fund be kept capitalized
    so that it can accomplish its purpose. As matters stand now,
    our Nation will experience severe economic shocks and
    shortfalls in funding for critical priority Compact sectors of
    health and education. If not done by Fiscal Year 4, this
    certainly can be done over a 20-year Compact extension.
        A first step can be taken by the U.S. making the
    contributions it pledged in both its 1986 and 2003 Compact
    laws. Twenty million was to be provided if it could
    substantiate economic losses due to the U.S. nullifying tax and
    trade provisions of the Compact after it was signed. The first
    reaction of some in the RMI to the announcement of Compact
    extension negotiations was to recall this unfulfilled
    commitment.
        The 2003 amendments replaced many U.S. education programs
    with a supplemental education grant. The $6.1 million a year
    indexed for inflation has never been provided. It is now 5.5
    million in dollars worth less. The grant should be a permanent
    appropriation, as is other Compact provisions.
        Current Federal programs and services agreement also need
    to be continued, such as the Postal Service, FEMA, Weather
    Services, Federal Aviation Authority programs, and special
    education programs and Pell Grants. The RMI cannot replace
    them.
        There are other issues for negotiations that are of
    immediate priority concern. The preeminent one is the source of
    funding. It was not worked out for Palau Compact extension
    until 7 years after the 2010 agreement. The budget baseline
    needs to be addressed. Additionally, many agencies operate in
    the RMI, some unique and requiring special funding.
        The negotiations need to be conducted on the U.S. side in a
    way that will bring all involved seriously to the table and
    appreciative of the importance of their programs. The Compacts
    were negotiated by Ambassadors representing the U.S. President.
    Special representatives at the State Department renegotiated
    the 2003 Compact extension. The Palau extension model of
    regular State Department officers negotiating was insufficient.
        Finally, I must note a concern the Compact does not address
    and cannot effectively address, but must concern us all. The
    rising ocean is an existential threat that can reduce the size
    of our Nation and totally wipe it off the map.
        Thank you for this opportunity to discuss our concerns, and
    I am happy to answer any questions.
        [The prepared statement of Ambassador Zackios follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Sablan. Thank you very much, Ambassador Zackios.
        And now, my friend, Ambassador Susaia, please, you have 5
    minutes, sir.

    STATEMENT OF HON. AKILLINO H. SUSAIA, AMBASSADOR TO THE UNITED
             STATES FROM THE FEDERATED STATES OF MICRONESIA

        Ambassador Susaia. Thank you, Chairman, Ranking Members,
    distinguished members of the Committees. Thank you for
    convening this joint hearing and for the opportunity to testify
    before you today.
        I have submitted for the Committees copies of my full
    written statement. So, I wish to summarize the key points of
    the statement for the purpose of this hearing.
        The United States is and has been the closest friend and
    ally of the Federated States of Micronesia, as the FSM
    continues to grow and flourish as a young nation. The U.S. and
    the FSM have done much in recent months to acknowledge and
    celebrate the special relationship between our two countries.
        In May, our newly elected President, David W. Panuelo, came
    to Washington to meet with President Donald Trump and several
    Cabinet Secretaries. That visit reinforced the fact we have no
    greater friend in the world than the United States, and the
    United States respects and values the relationship it has with
    the FSM.
        We were, then, delighted to host two Cabinet Secretary
    officials, Secretary of Veterans Affairs Robert Wilkie and
    Secretary of State Mike Pompeo. This was the first time our
    Nation has been accorded such opportunities in our young
    history.
        The U.S. and the FSM have a longstanding strategic
    partnership that reflects the common values of our two
    countries, including our commitment to promoting sovereignty,
    the rule of law, democracy, and regional security. In 1986, the
    FSM and the United States entered the Compact of Free
    Association. The 1986 Compact was renewed and amended with the
    entry into force of the 2003 amended Compact of Free
    Association, which remains in effect today.
        Under these Compacts, the FSM has continuously granted the
    U.S. security and defense rights in the Territory of the FSM.
    FSM citizens have the right to live, work, and study in the
    United States without a visa. Under the 2003 amended Compact,
    the United States committed to provide certain key financial
    assistance through Fiscal Year 2023 and to provide U.S. Federal
    programs and services in the FSM.
        The Federated States of Micronesia is fully committed to
    its relationship with the United States which contributes to
    the strength and prosperity of both our nations. We look
    forward to being a part of the United States enhanced effort to
    promote a free and open Indo-Pacific and to advance our defense
    partnership even further.
        While the defense and immigration provisions in the amended
    Compact will continue after 2023, ensuring the continued
    strength of our partnership, certain financial assistance
    provisions of the amended Compact will expire after Fiscal Year
    2023. These provisions include Federal programs and services,
    Supplemental Education Grants and Sector Grants. U.S.
    contributions to the U.S.-FSM Compact Trust Fund are also set
    to expire. This financial assistance is a central pillar of our
    strong relationship and has further strengthened the bonds
    between our two countries.
        We were pleased to hear Secretary Pompeo's announcement
    last month in Pohnpei that the U.S. is prepared to work with
    the FSM on an extension of this support beyond Fiscal Year
    2023. We look forward to starting these negotiations with the
    U.S. very soon. The potential end of this financial assistance
    has created uncertainty for our government and our people.
    These discussions and the decisions that will result will allow
    us to remove that uncertainty and move forward most effectively
    with our strategic partnership with the United States.
        In preparation for these discussions, the FSM has
    established a Joint Committee on Compact Review and Planning
    that will be responsible for negotiating with the United
    States. Recently, the Committee announced the appointment of
    the chief negotiator. In response, the FSM is still awaiting
    further information from the U.S. on a proposed schedule for
    beginning discussions.
        To conclude, Chairman and members of the Committees, the
    FSM government appreciates the House Natural Resources' and
    Foreign Affairs' longstanding commitment to the enduring
    partnership between the U.S. and the FSM. Although the year
    2023 may seem distant now, there is much work to be done that
    will require coordinated efforts among the various parts of the
    FSM government and both the Executive and legislative branches
    of the U.S. Government. Given the number of issues to be
    addressed and the great importance of these issues to both of
    our countries, we believe that this work should begin as soon
    as possible. We look forward to keeping the Committees informed
    of significant developments as this process moves forward.
        We hope that these negotiations can serve as an opportunity
    for the U.S. and the FSM to reaffirm our unique friendship and
    strong partnership and our mutual commitment to promoting
    security and stability in the Indo-Pacific region.
        Thank you, Chairmen, for holding this hearing on this
    important topic.
        [The prepared statement of Ambassador Susaia follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Sablan. Thank you. Thank you very much, Ambassador.
        And at this time, I would yield to the gentleman from Guam,
    Mr. San Nicolas, for 5 minutes.
        Mr. San Nicolas. Thank you, Mr. Chairman.
        Ambassador Zackios and Ambassador Susaia, very nice to see
    you, my friends. ``Yawk-way.''
        [Speaking foreign language] for making the time to be with
    us here today and for all of your advocacy for the region that
    I know is a very difficult task that you undertake with all of
    your hearts.
        Mr. Chairman, I think that the implementation negotiation
    that we are talking about here today needs to move beyond a
    continuation discussion and it needs to include opportunities
    for our FAS allies to really strengthen to an American
    standard. When we shortchange the FAS, that is an ultimate
    reflection of the United States' commitment to its allies, and
    really you are the only freely associated allies we have. It is
    an actual step above almost all of the other diplomatic
    relationships that we have throughout the globe. And so, if our
    freely associated allies are not a reflection of American
    excellence, then how can we go out as America and truly make
    the case that embodying American excellence is something that
    is going to be worthwhile? I think we need to really understand
    that and we need to make a commitment to that.
        With that, Mr. Chairman, I have to put on the record
    certain things that I believe we need to consider to include in
    this implementation agreement in order for our allies to be
    able to have access to some of the most robust programs that
    this country has to offer.
        First of all, Mr. Chairman, we need to make sure that we
    include the ability for our FAS allies to have access to
    capital the same way that U.S. territories are able to access
    that capital. Right now, a U.S. territory is able to go out
    into the bond market and is able to float a triple tax-exempt
    debt that they can use for development. Right now, our FAS
    allies are stuck in the international bond market, which has
    exorbitant interest rates compared to what you would be able to
    get for a triple tax-exempt bond in our domestic markets.
        Being able to extend access to our domestic markets to our
    FAS allies would grant them the ability to finance dramatic
    infrastructure projects that could be life-altering for the
    people and for the economy of the FAS. They can build schools.
    They can build hospitals. They can build roads. They can expand
    their airports. They can grow and develop, so they are not
    dependent on grants and not even dependent on interest from a
    Trust Fund.
        Second, Mr. Chairman, we need to look into making sure that
    our FAS citizens are able to access something that all of the
    other administered areas under the Department of the Interior
    are able to access, and that is Medicaid. If you live in a
    territory and you are administered by the Department of the
    Interior, your citizens are able to access Medicaid. If you are
    a Native American, your tribal government, you are still able
    to access Medicaid. FAS citizens are the only citizens that are
    under an administering relationship of the Department of the
    Interior that are not able to access Medicaid.
        Accessing Medicaid will not just be the extension of a
    benefit to the Freely Associated States; it would actually help
    the host areas in terms of being able to take on the cost of
    the hosting. On Guam, we are not able to extend Medicaid to
    freely associated citizens. In Hawaii, they are not able to
    extend Medicaid to freely associated citizens. So, the cost of
    subsidizing the health care for these citizens is borne at a
    rate that we are not able to access as if they were full
    citizens of the United States.
        So, when we have JEMCO and JEMFAC underinvesting in health
    care in the Freely Associated States, and we have their
    citizens moving to host areas in order to get that health care,
    they are coming in and they are being subsidized at the full
    cost of somebody who actually is not able to have this
    Medicaid. So, being able to extend that program will not only
    help the host areas, but if we can also extend that program
    into the FAS, perhaps even considering reprogramming grant
    funding that is sitting in JEMCO and sitting in JEMFAC, and
    having it be used for matching funds for Medicaid, that could
    actually not only help to fund the health care needs of the
    areas, but it would provide a base level of funding to be able
    to bring in new service providers and new investment, so we
    have less need for migration out for the purposes of health
    care.
        Mr. Chairman, I wanted to put my friends on the record,
    particularly with JEMCO and JEMFAC, because I believe that that
    is a reflection of underutilization of existing resources. And
    I think that we really need to talk about why we are not using
    the resources that are already provided in order for us to be
    able to meet the needs of our allies in the Freely Associated
    States.
        So, I will go ahead and start with you, Ambassador Susaia,
    if I may. Can you elaborate on the amount of funds that is
    sitting in JEMCO and what the FSM believes is not only the
    reason for that money sitting there, but the impact for not
    being able to access those grants?
        Ambassador Susaia. Thank you, Chairman. Thank you,
    Congressman San Nicolas.
        I heard the answer from Director Pula when you asked the
    same question to him. I know that we have challenges, too, in
    our country, FSM, in terms of utilizing the infrastructure
    funds, mainly the infrastructure funds, because of several
    issues. Like, in some of our States, the government does not
    have eminent domain to lands on which some of these projects
    are supposed to be built, like schools, dispensaries, and
    others. So, that is contributing to the delay.
        But, on the other hand, the conditions and the restrictions
    that are placed by the Compact or the fiscal procedures
    agreement, the supplementary agreement to the Compact, is also
    contributing to the delay and the backlog of the use of these
    funds. For instance, the bonding requirements for projects,
    construction projects, is very prohibitive for companies, local
    companies, in the FSM to bid for these projects. So, we end up
    advertising for companies to come here from Guam or Honolulu or
    California, and the amount of these projects is not that huge
    in terms of these companies' profit. So, the delay is always
    finding companies to bid for these projects.
        So, to me, I think those are the bottlenecks that we are
    facing in terms of implementing these infrastructure funds.
        Mr. Sablan. Ambassador, thank you.
        If my colleagues would agree, we may have a second round of
    questions, but Guam's Congressman's time is up.
        I would like to ask unanimous consent--there is four of us
    here; Dr. Gootnick is still in the room--does anybody have any
    objection to Dr. Gootnick joining the panel?
        Do you have any objection, Dr. Gootnick, to coming in and
    joining the panel?
        Miss Gonzalez-Colon. He may regret it.
        [Laughter.]
        He may regret it, but----
        Mr. Sablan. You are more than welcome, but you do not have
    to. But you know how important you are here, Dr. Gootnick.
        And so, thank you. Thank you.
        Dr. Gootnick is seated as a participant in the panel, too.
        And at this time, I recognize my friend and distinguished
    Resident Commissioner from Puerto Rico, Miss Gonzalez-Colon,
    for 5 minutes.
        Miss Gonzalez-Colon. Thank you, Mr. Chairman.
        I would like to introduce for the record the statement of
    Ranking Member Michael McCaul from Foreign Affairs and----
        Mr. Sablan. Without objection.
        Miss Gonzalez-Colon. Thank you.
        [The prepared statement of Mr. McCaul follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Miss Gonzalez-Colon. And first of all, I want to say thank
    you and welcome to the Ambassadors. I know it is a long way
    coming here to DC and to manage all these issues.
        I was reviewing the General Accounting Office report on the
    Fund, on the Trust Funds, and how those funds are distributed.
    One of the questions we did to the Department of the Interior
    was in terms of if there is any oversight. There are many
    recommendations regarding the policies that are going to be
    implemented, the fiscal changes that may be happening in those
    forms.
        My question to you and to this panel will be in terms of,
    what changes specifically do you understand should be addressed
    to have more opportunity to use those funds? Because everybody
    is talking about making changes. What kind of changes
    specifically are you seeking, if any? Ambassador Zackios?
        Ambassador Zackios. Thank you, Congresswoman, for the
    question.
        I think the first thing that we feel is important to
    consider post-2023 is the FPA. We feel that the distribution
    policy that currently is in the FPA that addresses use of
    resources from the Trust Fund needs to be revisited.
        We see, and I understand from the earlier questions about
    management, FPA as it applies to grants and programs under the
    current agreement does not necessarily under the Compact apply
    to the Trust Funds. So, I think we need to address that issue.
        I would end my answer here by saying that in talking about
    the issue of our Trust Fund, I think fiscal responsibility does
    not necessarily translate to micromanagement. I think these are
    independent countries, and I think we could work together to
    make sure that resources that are provided are put to good use
    without the burdens of micromanagement that will stifle a lot
    of the efforts that we are trying to achieve from these
    resources to help these countries.
        Thank you.
        Miss Gonzalez-Colon. Ambassador.
        Ambassador Susaia. Yes. I think the fact remains that the
    forecast of projected revenue was an issue that remained. It is
    insufficient. So, it is not so much to change the wording of
    the Compact for how to utilize the Trust Fund proceeds. It is
    really the fact that the return on the investment to date is
    not sufficient to fund, to replace the Sector Grants.
        So, it is our hope that, if we can extend the term of the
    Compact and continue to receive the same level of funding, or
    whatever the abilities were to buildup the corpus, so that
    eventually we will have more budgetary, several lines to take
    care of the Sector Grants.
        Miss Gonzalez-Colon. Can you describe, both of you describe
    the practices you have been doing in your nations in order to
    have or increase budgetary and economic self-reliance during
    the last years, and how those two islands may be impacted if
    there is no negotiation of a new agreement? I mean, what
    services are going to be impacted directly immediately if you
    do not have a new Compact?
        Ambassador Zackios. In addition to most of this,
    Congressman, that would be mostly affected, health and
    education are key sectors that will be really affected by
    these. So, the continuation of the extended provisions is very
    important, as I have cited, and the funding of the Trust Fund,
    so that it can address this.
        To your point of what we have done, the Marshall Islands
    has invested its own resources into the Trust Fund, $30-plus
    million. When it started, when the Compact was initiated, we
    put $30 million, and then, that plus additional.
        We have also gone out, as required by the Compact, to find
    subsequent contributors. So, the Marshall Islands had engaged
    Taiwan to become a subsequent contributor in the Trust Fund. We
    hope that, as is required also under the Compact, the U.S. can
    also help us find subsequent contributors instead of also
    putting more resources into the Trust Fund in the upcoming
    negotiation by extending the full term of the Compact extension
    period to address the shortfalls in the Trust Fund.
        Miss Gonzalez-Colon. Thank you. I know my time has expired.
    But, Ambassador, you can submit it for the record later on.
        Mr. Sablan. Yes, thank you, Congresswoman Gonzalez-Colon.
        I have just been told that the Committee is going to need
    the room after this. So, we will not be able to have additional
    time for a second round.
        Let me take my 5 minutes and ask--I will, Ambassadors,
    submit questions for the record. I would like for you to
    respond to those in writing.
        But let me go this way. Ambassador Susaia and Ambassador
    Zackios, today we heard the importance of sustaining the
    relationship between the United States and the Freely
    Associated States. So, as we look ahead to 2023, how can our
    Committees or the U.S. Congress be more helpful? Or are there
    any further recommendations you would like us to keep in mind?
    A minute and a half. Ambassador Susaia?
        Ambassador Susaia. Thank you, Chairman. If I may, I would
    like to take the first crack at the question, and my colleague
    here can help.
        We are mindful of the role that the Congress plays in the
    review and approval of any agreement that will be negotiated
    between our negotiators and the U.S. Especially your Committees
    on Natural Resources and Foreign Affairs, the role that you
    play in terms of the jurisdiction of these types of agreements.
        And so, I wish, on behalf of the FSM, to ask that the
    review and approval process, knowing how the legislative
    process in the Congress plays, that it be done on a timely and
    expeditious basis. As you alluded to in your earlier statements
    to the other panel, the experience that Palau has, we really do
    not want to go that route, down that same road.
        Thank you, Chairman.
        Mr. Sablan. Any other thoughts and ideas you have, you
    could submit them in writing.
        Ambassador Susaia. Yes.
        Mr. Sablan. Ambassador Zackios, please.
        Ambassador Zackios. I would like to associate myself with
    those comments by Ambassador Susaia, but also say that, in the
    case of the Marshal Islands, one thing that we would like the
    Committees to bear in mind, the joint Committees--and we want
    to thank the House for passing the $20 million that will go
    into the Trust Fund. I think that is a very important start, as
    we discuss this issue. So, the commitment to pay the $20
    million, I think it is a very important one to start the
    relationship.
        And we were asked other questions about the need to
    continue this relationship. It is a very important
    relationship. We say that it started after World War II. I
    would, in fact, say that it started in the 1800's when the
    Boston missionaries actually visited the islands.
        But the relationship and the extension of this relationship
    is very important, as we have heard also the pressure that is
    being put on these small island countries. China is very
    aggressively in the islands and is trying to influence, of
    course, these countries to change their relationship. The
    Marshall Islands is firm with its commitment to the U.S. In
    fact, President Heine said that we are open to providing
    additional space for strengthening up the partnership for
    defense purposes.
        Mr. Sablan. Thank you.
        Ambassador Zackios. So, the extension of this relationship,
    the speed at which we will conclude this relationship, the
    level of the people that will participate, and the amount of
    resources that is required is fully important for the
    Committees.
        Mr. Sablan. Thank you, Ambassador.
        Ambassador Zackios, one of the 16 people who petitioned the
    United Nations Committee on the Rights of the Child this week
    for action on climate change was from the Marshall Islands. I
    do not know how we can talk about reviewing the Compact of Free
    Association with your nation without acknowledging that lots of
    the Marshalls is in danger of disappearing in the years ahead.
    And so, I have to think that this reality must be in the minds
    of many in the Marshalls and in your mind and may influence
    what you want to achieve in the Compact renewal and
    negotiations. I let you know that I acknowledge that and that I
    will continue to encourage my colleagues to keep that in mind
    also.
        Dr. Gootnick, I brought you back for two reasons. And I
    have got 45 seconds. One, Dr. Gootnick, is that there is always
    this disagreement on how to allocate, how to determine, how to
    put value on the cost of Compact impact aid. I mean, of course,
    the territories and the State of Hawaii, for example, always
    have their own numbers. And everyone who comes in and is signed
    up as someone who identifies as Chuukese, as FAS, even if that
    person is fully employed and contributing to that State or
    territory, even if that person happens to be Chuukese, but is
    born in the State or territory, there has been no definition of
    how to identify, use a common denominator to estimate the cost
    of Compact impact, but it is huge. There is no question about
    it.
        But I want to ask you, Dr. Gootnick, and if you cannot
    answer right now, then please submit for the record. GAO's 2018
    report noted that the Federated State of Micronesia and the
    Republic of Marshall Islands Compact Trust Funds face risks and
    will not provide disbursements in some future years. So, has
    GAO concluded how much additional contributions are needed to
    reduce the risk of no disbursements?
        Dr. Gootnick. So, I think the issue is more with respect to
    the structure of the Trust Fund. The Trust Fund, when it was
    set up, was very much set up in an effort to maintain the
    corpus of the Trust Fund. So, the net effect of that, of the
    Trust Fund rules, is that it constrains disbursement. And I do
    not know that I have a specific figure for you, and I do not
    know that one could develop----
        Mr. Sablan. You can provide it for us.
        Dr. Gootnick. I will think about your question.
        Mr. Sablan. Thank you.
        Dr. Gootnick. I am not sure that under the current rules
    one could come up with a specific answer to it.
        Mr. Sablan. Thank you, but give us your best answer. I know
    you will. You always do.
        Dr. Gootnick. I would like to mention, since you brought me
    back, one quick point on Compact migration. The first thing is
    there is no question that the right to migrate is a lynchpin of
    the Compacts. So, it is there. There is also no question that
    Compact citizens migrate primarily for economic reasons, for
    work, to educate their children, and to take care of health
    care needs. At the same time, there is also no question that
    there are financial costs.
        I have teams that have been out to the affected
    jurisdictins in the past and a team that is just recently
    returned, speaking to State officials, speaking to Compact
    migrants, and speaking to Micronesian officials. It is the case
    that the single most significant thing and prevalent thing that
    is cited is access to Medicaid; that prior to 1996, there was
    access to Medicaid. Subsequent to 1996 welfare reform, there
    have been a number of machinations in Hawaii, for example, but
    there is not access. And I think with respect to the Federal
    Government's role, while not taking a position one way or the
    other, that is the biggest issue that is out there.
        Mr. Sablan. Thank you, Dr. Gootnick.
        I do not want to be accused that I am abusing this seat.
    But, at this time, I would like to recognize the distinguished
    gentlelady from American Samoa, Ms. Radewagen, for 5 minutes.
        Mrs. Radewagen. Thank you, Mr. Chairman. I will try to keep
    it short. I have several questions I wanted to ask, but in the
    interest of time I will submit them, and then, ask for the
    answers to be submitted later.
        But there are many unaddressed issues relating to the U.S.
    testing of 67 nuclear bombs on formerly populated islands in
    the RMI. And this question is for Ambassador Zackios. Most
    recently, as you noted in your testimony, there is great
    concern about the leakage of radioactive waste from the U.S.
    nuclear tests buried at the Runit Dome on Enewetak. The House-
    passed National Defense Authorization Act for Fiscal Year
    requires a study of Runit, and I want to say that I am greatly
    concerned about the current situation on Enewetak. Are there
    other lingering issues from the U.S. nuclear legacy that should
    be kept in mind in a Compact extension?
        Ambassador Zackios. Thank you, Congresswoman.
        In addition to what I stated in my testimony about the
    Runit Dome and the conveyance of gratitude for the efforts that
    are currently undertaken, yes, there are issues that are
    unresolved from the nuclear testing program under the Section
    177 agreement. Of course, as we understand, that agreement is
    an espousal agreement, but it also provides for a Changed
    Circumstance Petition. The Marshall Islands submitted a Changed
    Circumstance Petition through Congress in the year 2000, and
    that petition to address this lingering issues of shortfalls,
    to address cancers, land remediation, and other things relative
    to the testing program has not been fully addressed.
        So, I think it is also important to look at the changed
    circumstance and other issues that are currently before the
    Congress, including what is already before the Congress with
    regards to Runit Dome.
        Mrs. Radewagen. Thank you, Ambassador.
        So, I guess I will put a second question in there. After
    all, I am entitled to 5 minutes.
        A recent report by the RAND Corporation noted that China is
    likely to seek ways to challenge American dominance with its
    Pacific Island allies by floating economic incentives to the
    FAS in exchange for loosened ties to Washington. RAND further
    concluded that, quote, ``Going forward, the United States
    should demonstrate their commitment to the region by
    maintaining appropriate levels of funding to the FAS and
    strengthening engagement with the FAS more broadly. Failure to
    do so would be a self-inflicted wound that could come at the
    expense of the foreign policy and defense interests of the
    United States.''
        So, Ambassador Zackios, please tell us how China is
    developing influence in the RMI and what more can the United
    States do to demonstrate its commitment to the region?
        Ambassador Zackios. Thank you, Congresswoman.
        With respect to that question, it is a very important
    question. First, I would say that China is developing its
    influence in the islands. If we can look at it actively, that
    is currently taking place between the U.S. and China in the
    Marshall Islands: $2.2 billion of trade was done between China
    compared to $311 million of trade with the Marshall Islands.
    Additionally, telecommunication, Huawei is very involved in the
    islands through their telecommunications system. And there is
    so much personal ``pursue action'' by China. It is courting our
    leaders to China, taking them to Beijing.
        So, the importance, as you have rightly stated, about
    putting resources there is very important, sufficient resources
    to address this relationship. We talked about discouraging
    this, and we talked about what other opportunities we have to
    look at in preparing yourself. We have the ship registry, and
    it was said in testimony earlier that China is penalizing our
    vessels that fly the RMI flag, as you are fully aware. We are
    the second largest flag in the world. And they are paying
    heavier taxes because of our relationship with the United
    States. So, those are issues that China is doing in the
    islands.
        As I said in my statement, they were trying to build a
    project and proposal on Rongelap Atoll, which is very proximate
    to Kwajalein, 1,000 houses, and that created a place almost
    similar to Hong Kong that would at autonomous from the Republic
    of the Marshall Islands. In fact, their last attempt was to
    move a motion of no confidence by pressuring our leaders to
    move a motion of no confidence in our current government
    because of this pressure to make the change.
        Mrs. Radewagen. Thank you, Your Excellencies.
        Thank you, Mr. Chairman.
        Mr. Sablan. Thank you. Thank you very much.
        Without objection, all members may have 5 days to submit
    questions, statements, and extraneous materials for the record,
    subject to the length limitations in the rules.
        Having no further business, this hearing--oh, yes, of
    course, thank you. Thank you very much.
        I am sorry, I have a Virgin Islander here who is reminding
    me.
        [Laughter.]
        Thank you very much.
        I will come back and talk to you, Dr. Gootnick. Thank you
    always, sir. We will continue to need your guidance, and
    particularly on this one issue that is never going to go away,
    how to find--which Interior should do--some kind of methodology
    to determine the cost, the value of Compact impact to several
    jurisdictions that are actually paying for the cost of
    migration now.
        But thank you, everyone.
        And this hearing is adjourned.
        [Whereupon, at 12:45 p.m., the Committees were adjourned.]

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