[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]


                  PRESERVING U.S. INTERESTS IN THE INDO-
                   PACIFIC: EXAMINING HOW U.S. ENGAGE-
                  MENT COUNTERS CHINESE INFLUENCE IN 
                              THE REGION

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

                           OVERSIGHT HEARING

                               BEFORE THE

               SUBCOMMITTEE ON INDIAN AND INSULAR AFFAIRS

                                 OF THE

                     COMMITTEE ON NATURAL RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               __________

                         Tuesday, May 16, 2023

                               __________

                           Serial No. 118-29

                               __________

       Printed for the use of the Committee on Natural Resources
       
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        Available via the World Wide Web: http://www.govinfo.gov
                                   or
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                               __________

                                
                    U.S. GOVERNMENT PUBLISHING OFFICE                    
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-----------------------------------------------------------------------------------          
                    COMMITTEE ON NATURAL RESOURCES

                     BRUCE WESTERMAN, AR, Chairman
                    DOUG LAMBORN, CO, Vice Chairman
                  RAUL M. GRIJALVA, AZ, Ranking Member

Doug Lamborn, CO		Grace F. Napolitano, CA		
Robert J. Wittman, VA		Gregorio Kilili Camacho Sablan, 
Tom McClintock, CA		  CNMI
Paul Gosar, AZ			Jared Huffman, CA
Garret Graves, LA		Ruben Gallego, AZ
Aumua Amata C. Radewagen, AS	Joe Neguse, CO
Doug LaMalfa, CA		Mike Levin, CA
Daniel Webster, FL		Katie Porter, CA
Jenniffer Gonzalez-Colon, PR    Teresa Leger Fernandez, NM
Russ Fulcher, ID		Melanie A. Stansbury, NM
Pete Stauber, MN		Mary Sattler Peltola, AK
John R. Curtis, UT		Alexandria Ocasio-Cortez, NY
Tom Tiffany, WI			Kevin Mullin, CA
Jerry Carl, AL			Val T. Hoyle, OR
Matt Rosendale, MT		Sydney Kamlager-Dove, CA
Lauren Boebert, CO		Seth Magaziner, RI
Cliff Bentz, OR			Nydia M. Velazquez, NY
Jen Kiggans, VA			Ed Case, HI
Jim Moylan, GU			Debbie Dingell, MI
Wesley P. Hunt, TX		Susie Lee, NV
Mike Collins, GA
Anna Paulina Luna, FL
John Duarte, CA
Harriet M. Hageman, WY                              

                    Vivian Moeglein, Staff Director
                      Tom Connally, Chief Counsel
                 Lora Snyder, Democratic Staff Director
                   http://naturalresources.house.gov
                                 ------                                

               SUBCOMMITTEE ON INDIAN AND INSULAR AFFAIRS

                     HARRIET M. HAGEMAN, WY, Chair

                JENNIFFER GONZALEZ-COLON, PR, Vice Chair

               TERESA LEGER FERNANDEZ, NM, Ranking Member

Aumua Amata C. Radewagen, AS         Gregorio Kilili Camacho Sablan, 
Doug LaMalfa, CA                         CNMI
Jenniffer Gonzalez-Colon, PR         Ruben Gallego, AZ
Jerry Carl, AL                       Nydia M. Velazquez, NY
Jim Moylan, GU                       Ed Case, HI
Bruce Westerman, AR, ex officio      Raul M. Grijalva, AZ, ex officio
 
                               ---------                                
                               
                               CONTENTS

                              ----------                              
                                                                   Page

Hearing held on Tuesday, May 16, 2023............................     1

Statement of Members:

    Hageman, Hon. Harriet M., a Representative in Congress from 
      the State of Wyoming.......................................     1
    Leger Fernandez, Hon. Teresa, a Representative in Congress 
      from the State of New Mexico...............................     2
    Westerman, Hon. Bruce, a Representative in Congress from the 
      State of Arkansas..........................................    59

Statement of Witnesses:

    Watson, Peter, President and CEO, The Dwight Group, LLC, 
      Washington, DC.............................................     4
        Prepared statement of....................................     6
        Questions submitted for the record.......................    12
    Gray, Alexander, Managing Partner, American Global 
      Strategies, LLC, Oklahoma City, Oklahoma...................    14
        Prepared statement of....................................    16
        Questions submitted for the record.......................    18
    Grossman, Derek, Senior Defense Analyst, The RAND 
      Corporation, Santa Monica, California......................    20
        Prepared statement of....................................    22
        Questions submitted for the record.......................    30
    Friberg, Emil, Former Assistant Director, GAO International 
      Affairs and Trade, Arlington, Virginia.....................    32
        Prepared statement of....................................    33
        Questions submitted for the record.......................    37
    Paskal, Cleo, Non-Resident Senior Fellow, Foundation for 
      Defense of Democracies, Washington, DC.....................    43
        Prepared statement of....................................    45
        Questions submitted for the record.......................    54

Additional Materials Submitted for the Record:

    Submissions for the Record by Representative Radewagen

        Letter from David W. Panuelo, President, Federated States 
          of Micronesia to FSM Leadership dated March 9, 2023....    76
   

 
  OVERSIGHT HEARING ON PRESERVING U.S. INTERESTS IN THE INDO-PACIFIC: 
 EXAMINING HOW U.S. ENGAGEMENT COUNTERS CHINESE INFLUENCE IN THE REGION

                              ----------                              


                         Tuesday, May 16, 2023

                     U.S. House of Representatives

               Subcommittee on Indian and Insular Affairs

                     Committee on Natural Resources

                             Washington, DC

                              ----------                              

    The Subcommittee met, pursuant to notice, at 2:25 p.m., in 
Room 1334, Longworth House Office Building, Hon. Harriet M. 
Hageman [Chairwoman of the Subcommittee] presiding.
    Present: Representatives Hageman, Radewagen, LaMalfa, 
Gonzalez-Colon, Carl, Moylan, Westerman; Leger Fernandez, 
Sablan, and Case.

    Ms. Hageman. The Subcommittee on Indian and Insular Affairs 
will come to order.
    Without objection, the Chair is authorized to declare a 
recess of the Subcommittee at any time.
    The Subcommittee is meeting today to hear testimony on 
preserving the United States' interests in the Indo-Pacific: 
Examining how U.S. engagement counters Chinese influence in the 
region.
    Under Committee Rule 4(f), any oral opening statements at 
hearings are limited to the Chairman and the Ranking Minority 
Member. I therefore ask unanimous consent that all other 
Members' opening statements be made part of the hearing record 
if they are submitted in accordance with Committee Rule 3(o).
    Without objection, so ordered.
    I will now recognize myself for an opening statement.

 STATEMENT OF THE HON. HARRIET M. HAGEMAN, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF WYOMING

    Ms. Hageman. I am Harriet Hageman, and I am the Chairman of 
the Subcommittee on Indian and Insular Affairs.
    The United States is a Pacific power through its 
territories of Guam, Northern Mariana Islands, and American 
Samoa. These territories are home to over 200,000 American 
citizens and, as such, the United States has an interest in a 
free and open Indo-Pacific that is free from a malign 
influence.
    Furthermore, the United States holds special relationships 
with three Pacific Island nations known as the Freely 
Associated States, or FAS. These three countries are the 
Republic of Palau, the Republic of the Marshall Islands, and 
the Federated States of Micronesia. Through compact agreements 
with these countries, the U.S. gains extraordinary security 
rights in return for U.S. economic assistance.
    The U.S. Department of the Interior, through the Office of 
Insular Affairs, manages Federal relations with the U.S. 
territories and FAS under the Compacts of Free Association, 
including administration and monitoring of grants, economic 
assistance, and Federal programs as prescribed by Federal 
statutes, and applicable agreements enacted into law. These 
interests and relationships are why we are here today.
    The People's Republic of China, or the PRC, is actively 
seeking to increase its influence in the region and undermine 
U.S. interests. The PRC has adopted a strategy of disruption 
and destabilization aimed at what I am told by one of our 
witnesses has described as political and social entropy in 
small, vulnerable nations. I hope we can hear more about this 
today and shine a light on what China is doing within the Indo-
Pacific Region.
    Whatever the answer to the question about what China's 
intentions may be, what the world now knows is that Beijing is 
taking actions to assert or seize effective political control 
throughout the Indo-Pacific Region. It also has escaped no 
one's attention that the PRC seemingly has adopted a century-
old game plan to dominate the Pacific Islands and use them as a 
platform to expand the Chinese Communist Party's malign 
influence.
    In furtherance of that strategy, China is aggressively 
threatening political stability in the Pacific Island nations 
through political warfare and economic coercion. These actions 
serve to challenge U.S. influence, interests, and values in the 
region.
    America has not forgotten the lessons of World War II and 
the Cold War. The United States will not stand idly by in the 
face of PRC political provocation, attacking the sovereignty of 
our Pacific allies and interference in U.S. Pacific Island 
territories. America is renewed in our determination to restore 
a stable international order in the region that respects the 
integrity of democratic self-government for all island peoples. 
To that end, we will appreciate any insights on how U.S. 
engagement will contribute to stability in the region and 
counter China's malign influence on our friends and our allies.
    I want to thank the witnesses that are here, and I look 
forward to their testimony.
    The Chair now recognizes the Ranking Minority Member for 
any statement.

STATEMENT OF THE HON. TERESA LEGER FERNANDEZ, A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW MEXICO

    Ms. Leger Fernandez. Thank you, Madam Chair, and thank you 
to our witnesses, and my apologies for being a little late. We 
had to have a moment of silence on the Floor of the House today 
because of the loss of three beautiful souls to gun violence, 
and the heroic work of our law enforcement officers, two who 
also ended up in the hospital. So, my apologies.
    But there is something about when we think about, from 
places as small and far away as Farmington, New Mexico, to the 
islands, the Freely Associated States, that we are all 
connected with each other, and we are all seeking to hold each 
other together and to look to see how we work together to make 
sure that we are stronger, and to make sure that we can bring 
peace to our communities and peace to the region in which you 
spend your time.
    Today's hearing on preserving U.S. interests in the Indo-
Pacific will include a good discussion on the Compacts of Free 
Association of the United States and the Freely Associated 
States, of the Federated States of Micronesia, and the 
Republics of Marshall Island and Palau.
    And, yes, we have maintained a special relationship with 
the Freely Associated States for more than seven decades. 
Through Compacts of Free Association entered into the 1980s, 
these nations, your nations, allowed the United States to have 
military access to the most strategic part of the Northern 
Pacific between Hawaii and the Philippines.
    Residents of the Freely Associated States are not citizens 
of the United States, but are granted residence and other 
privileges through their compacts, including the ability to 
reside and work in the United States and its territories 
indefinitely as lawful non-immigrants.
    The initial compacts went into effect in the 1980s and 
renewed in 2003 for 20 years. They had three main goals: (1) 
end the U.N. trusteeship for securing full self-government for 
the islands; (2) continue a close defense relationship; and (3) 
assist the FSM and the RMI in their efforts to advance economic 
self-sufficiency. Economic sovereignty is key.
    With the People's Republic of China's increased presence in 
the Pacific in recent years, it is a top bipartisan, I believe 
very bipartisan, strategic priority to renew the financial 
provisions of the FAS compacts when they expire at the end of 
Fiscal Year 2023. In fact, I was in a Rules Committee hearing 
just last week on the PRC's coercive economic tactics. During 
the hearing, we heard about the need for collective resilience 
to more effectively curb bad actors like the PRC.
    In other words, collective resilience, we need to work 
together with our allies and our partners. That is how we 
strengthen our position. But if we let the economic assistance 
to the Freely Associated States end, we run the risk that the 
PRC will fill the vacuum in the region. So, this is a matter of 
defense, security, and economic opportunity, both for the 
United States and the FAS.
    Thankfully, the Biden administration's Special Presidential 
Envoy for Compact Negotiations has successfully negotiated and 
secured signed memorandums of understanding with all three 
compact nations to extend financial assistance for an 
additional 20 years. We expect the parties to sign the final 
agreements and transmit them to Congress in the coming weeks.
    Thank you once again, Madam Chair, for holding today's 
hearing. I look forward to hearing our witnesses explain the 
need of Congress to swiftly pass the COFA agreements once they 
are transmitted, and to highlight any issues that we need to 
learn more about. I am very much enjoying the educational 
experience of sitting and listening to such experts on these 
matters.
    Thank you very much, and I yield back.
    Ms. Hageman. Thank you.
    Now I will introduce our witnesses: Mr. Peter Watson, 
President and CEO, The Dwight Group, LLC, Washington, DC; Mr. 
Alexander Gray, Managing Partner, American Global Strategies, 
LLC, Oklahoma City, Oklahoma; Mr. Derek Grossman, Senior 
Defense Analyst, The RAND Corporation, Santa Monica, 
California; Mr. Emil Friberg, Former Assistant Director and 
Senior Economist, International Affairs and Trade, Government 
Accounting Office, Washington, DC; and Ms. Cleo Paskal, Non-
Resident Senior Fellow, Foundation for Defense of Democracies, 
from Washington, DC.
    Let me remind the witnesses that under Committee Rules, 
they must limit their oral statements to 5 minutes, but their 
entire statement will appear in the hearing record.
    To begin your testimony, please press the talk button on 
the microphone.
    We use timing lights. When you begin, the light will turn 
green. When you have 1 minute left, the light will turn yellow. 
And at the end of 5 minutes, the light will turn red, and I 
will ask you to please complete your statement.
    I will also allow all witnesses on the panel to testify 
before Member questioning.
    The Chair now recognizes Mr. Watson for 5 minutes.

STATEMENT OF PETER WATSON, PRESIDENT AND CEO, THE DWIGHT GROUP, 
                      LLC, WASHINGTON, DC

    Mr. Watson. Thank you very much, Chairman Hageman, Ranking 
Member Leger Fernandez, and distinguished members of the 
Subcommittee. Thank you indeed for the privilege and honor of 
inviting me to visit with you today.
    My written statement, of course, addresses the interrelated 
economic, social, and political development challenges that the 
Pacific Islands have faced in the past and will continue to 
face as we enter what one hopes will be a new era of deepening 
engagement by the United States, Japan, Australia, New Zealand, 
and indeed, other developed democracies of the world in the 
Pacific Islands Region, as represented by the Pacific Islands 
Forum nations, or PIF, as you wish, as an acronym.
    The PIF community, of course, includes the Freely 
Associated States of FSM, Federated States of Micronesia, 
Marshall Islands, and Palau. And my most recent experience with 
the Palau Economic Advisory Group informs the narrative of my 
written statement.
    My prepared statement also includes an analysis of the 
critical need for the U.S. national vigilance in protection of 
the freedom and security of all three U.S. Pacific Island 
domestic territories: Guam, CNMI, and American Samoa, which I 
want to spend some time focusing on, the latter indeed needing 
fisheries security enforcement to be urgently prioritized.
    Of course, as I learned initially during my tour of duty at 
the National Security Council, where, like Alex, I was 
responsible for the Pacific Islands, I realized the fullest 
possible development potential by the Pacific Island community 
also serves the individual and collective strategic imperatives 
of the United States and our allies.
    Accordingly, to understand how the COFA for the FSM, RMI, 
and Palau became successfully included in this complex 
partnership, it is axiomatic that every president since Truman 
and every U.S. Congress since 1946 has acted consistent with 
one overarching and immutable principle. It has been the 
strategic denial of the islands now comprised by the FSM, RMI, 
and Palau to the military forces of any nation, unless by 
agreement of the United States, and that is unsurpassed by any 
other strategic imperative in U.S. relations with those 
islands.
    From 1947 to 1986, as we all know, the U.S. administration 
of these islands was pursuant to the decision of the president 
and Congress to reject annexation and to place the islands in 
the U.S. trusteeship system. The trusteeship agreement 
expressly provided for the United States to combine 
international standards of self-determination and application 
of the same domestic laws Congress applied in the U.S. 
territories, including nearby Guam.
    It was during the four decades of the trusteeship that the 
United States encouraged the peoples' also traditional and 
elected leaders to embrace the standard of living that 
includes, for example, social, political, and economic reliance 
on dependable and safe modern commercial civil aviation 
possible through the same FAA en route aviation safety system 
provided in the U.S. states and territories, which continues 
under COFA.
    The same was true of the U.S. Postal Services, the U.S. 
Department of Education scholarship and early childhood 
education programs, U.S. weather services, a combination of 
FEMA and USAID disaster relief programs, FDIC, and over a dozen 
other Federal programs and services otherwise only provided in 
U.S. states and territories.
    Again, the United States actively encouraged this 
dependence during the trusteeship, when the islands played a 
crucial and irreplaceable role in America's arms race with the 
USSR and the success of nuclear deterrence strategy that 
prevented nuclear war for decades. And the return on U.S. 
investment in these islands during the Cold War and trusteeship 
was matched under COFA by the benefits to America during the 
war on terror of the missile defense system that could not have 
been otherwise developed without COFA.
    In close, Madam Chair, as we now face PRC competition and 
threats that come with it, the COFA nations and our territories 
are even more vital than ever to America's strategic 
repositioning. In addition to the strategic denial and basing 
and operating rights from Kwajalein to Angkor, the citizens of 
the Freely Associated States serve under COFA in the armed 
forces in the United States at a higher rate than most states 
in the same uniform and battles as our fellow Americans, as do 
the U.S. territories, especially American Samoa.
    Thank you, Madam Chair. These points are not the end of the 
discussion that we will have about the COFA for the months 
ahead. But it is part of the beginning of that discussion, and 
I thank you for giving me and my colleagues the opportunity of 
sharing these thoughts with you today.

    [The prepared statement of Mr. Watson follows:]
               Prepared Statement of Dr. Peter S. Watson
Introduction

    ``The Witness appreciates the invitation to appear before this 
distinguished Subcommittee. The subject matter of the Subcommittee's 
hearing is both a timely and an important one.''

    That I place the above in italicized quotation marks is an 
affectation, as I am actually quoting myself, not high manners--but I 
do so to reference the same was from my testimony some thirty-seven 
years ago--September 10, 1986--on the subject of ``Developments in the 
South Pacific Region,'' before Chairman Solarz's Asian and Pacific 
Subcommittee of the House Committee on Foreign Affairs.
    And as we look back on all the testimony presented that day--
available at https://books.google.com / 
books?id=yxuBCg7XnUgC&pg=PP3&source=gbs_selected_pages& 
cad=2#v=onepage&q&f=false--it's not unfair to observe that, in the 
intervening years, while the U.S. has had important regional successes 
 notably the conclusion of the Compacts of Free Association  it also 
had vital engagement opportunities lost or squandered, notwithstanding 
China therein identified as a burgeoning threat in the Solarz hearing--
high hubris on open display in the interim.
    As described below, some engagement gaps in U.S. attention have 
more recently been addressed--but Pacific Island leaders are no doubt 
wondering whether their nations are simply of more priority now due to 
the pervasive Chinese presence which my fellow panelists compellingly 
describe.
    Meanwhile, reading the news releases, many would be forgiven for 
believing the U.S. Pacific Island Leaders' Summit recently convened by 
President Biden in September last year (the Summit) was a historic 
first. Indeed, that credit goes to President H.W. Bush, who on October 
27, 1990, convened the initial U.S. Pacific Islands Summit in Honolulu, 
when meeting with the Heads of State of the Solomon Islands, Tonga, 
Tuvalu, the Cook Islands, Papua New Guinea, Western Samoa, Fiji, Nauru, 
Micronesia, the Marshall Islands, and Kiribati: https://www.presidency. 
ucsb.edu/documents/remarks-the-conclusion-the-pacific-island-nations-
united-states-summit-honolulu-hawaii
    However, the principal deliverable of that first summit, the `Joint 
Commercial Commission' never came into sufficiently funded fruition to 
meet the original expectations, thus left many Island leaders feeling, 
rightly or otherwise, the U.S. was unwilling or unable to fulfill its 
commitments.
    The gaps in U.S. engagement in the Pacific Islands in recent years 
belies its history there. The United States had some of the earliest 
western commercial and diplomatic contacts across the span of the 
Islands. In the first decades of the nineteenth century, American 
sealers, whalers and explorers traversed the Pacific. Many of the South 
Pacific Islands became ports of call. Indeed, the United States was 
involved in South Pacific trade well before it acquired itself a 
Pacific Coast in 1846.
    The U.S. had, for example, full consular representation with New 
Zealand in 1838--a full year before Great Britain had such 
representation in 1839. And yet, in recent times, the U.S. had allowed 
such subtle, yet profound, engagement modalities as the Peace Corps to 
atrophy and dissipate in the Pacific Islands, just as China was quietly 
yet pervasively inserting itself there in the profoundly disturbing 
ways we see.
    The Pacific U.S. Territories of American Samoa, Commonwealth of the 
Northern Mariana Islands (CNMI) and Guam, together with the Freely 
Associated States of Federated States of Micronesia, Republic of the 
Marshall Islands, and Republic of Palau all have embedded important 
levels of federal government economic engagement; however, as detailed 
by other panel members, this has not prevented the near-catastrophic 
Chinese intrusions seen in Rongelap (RMI), in the FSM, and with Palau 
not free from related challenges.
Why Dollar Diplomacy is Not Enough:

    As further described below, out-competing China requires an 
intelligent increase in the level of US direct economic assistance to 
the Pacific region, and to individual Pacific Island nations. More 
proof is not needed regarding the relentless implementation and 
expansion of the ``Belt and Road Initiative'' wherever it gains a 
foothold of access to provide grant or loan-funded infrastructure 
projects.
    Projects funded by China tend to be highly visible. Countless 
diplomats from the U.S. and like-minded nations have commented on the 
high visibility of China-backed projects. Those same diplomats bemoan 
the struggle to achieve a higher level of visibility of the economic 
assistance provided by their nations ``in the trenches,'' so to speak, 
of health, education, environment and other sectoral projects and 
programs.
    Pacific Islanders can't help but be impressed by the scale and 
visibility of China-backed projects. Notably, the quality of those 
projects is often sub-par, and in some cases the projects fail with the 
same visibility that China enjoyed at the ribbon-cutting stage. We 
could look at Pohnpei, the host island of the Capitol of the Federated 
States of Micronesia (FSM), for a highly visible failure. The state's 
government administration building was built on a prominent Kolonia-
town location with aid and labor from China. The large building allowed 
for the co-location of the Governor's office with much of the state's 
administration.
    Unfortunately for the people of Pohnpei, the building's poor 
design, poor quality, and foreign electrical and plumbing systems led 
to regret on the part of the state and embarrassment--one must 
presume--on the part of the donor. At this moment China is re-building 
the Pohnpei Administration building and they have redressed quality 
problem at other venues on the island of Pohnpei.
    So, counting on China to fail to learn lessons and improve the 
quality of its funded projects in the future would be unwise on the 
part of the U.S.
    The U.S. seeks to enhance the level of effective economic 
assistance it provides to Pacific Island nations, and we would do well 
to try to elevate the visibility and promote the high-quality of our 
targeted economic assistance projects and programs. We must expand 
collaboration and seek deeper opportunities to partner synergistically 
with like-minded donor partners in the Pacific.
    But we clearly must also be prepared for the response to be greater 
and greater spending by China in the Pacific. So, it unlikely we can 
fully counter the influence of China through enhanced spending alone. 
What's needed is a three-part strategy that goes beyond enhanced 
spending alone.
Expanding Engagement to Improve Stability and Security in the Pacific:

    The U.S. needs to do more to maintain our desired outcome of a 
``Free and Open Indo-Pacific.'' In addition to increasing the effective 
level and visibility of our economic assistance, second, we need to 
significantly enhance our economic-related engagement throughout the 
Pacific; and third, we need to enhance people-to-people engagement 
throughout the Pacific.
    As detailed below, enhanced economic assistance will achieve better 
and less volatile regional economic growth outcomes, and allow Pacific 
Island nations to sharpen their fiscal and economic policies to improve 
resilience in the face of periodic shocks to which each nation must 
adjust and broaden its economic base. Palau, for example, must avoid 
returning to the excessive reliance it had for several years on 
tourists from China.
    This paper will identify important new economic engagement 
initiatives that Washington is introducing into the Pacific Island 
region. Due to its early catalytic role, particular emphasis is given 
to the activities of the U.S. Trade Development Agency: https://
ustda.gov/ (TDA), with important mention to its partnering with the 
Japanese Bank for International Cooperation: https://www.jbic.go.jp/en/
index.html (JBIC). Likewise important is JBIC's teaming with the U.S. 
Development Finance Corporation: https://www.dfc.gov/ (DFC) with its 
critically-expanded finance facilities, and their joint teaming with 
Australia's Department of Foreign Affairs and Trade (DFAT).
    Enhanced economic engagement should, at a minimum, involve greater 
commercial interaction throughout the Pacific. We need to find direct 
and indirect ways to achieve increased trade and direct investment from 
the U.S. and from investors from like-minded nations including, of 
course, Japan and Australia. The US has long declared its desire to 
promote the objective of increased trade and investment; however, we 
need to undertake a serious review of the quality, quantity, and 
consistency of our efforts to achieve such an objective. A restart of 
some initiatives together with initiation of more and better programs 
would be a good start.
    Important economic engagement focus will be placed here on the 
activities of the Palau Economic Advisory Group (EAG). In particular, 
the EAG brings a comprehensive approach to assisting Palau to: (i) 
achieve better results with the economic assistance it receives, (ii) 
benefit from additional programs and partnerships to increase trade and 
investment from the US and like-minded nations, and (iii) to restore, 
enhance, and introduce programs that promote enhanced people-to-people 
engagements in Palau and in the U.S. However, allow me an immediate 
caveat here: I appear here today strictly in my private capacity, not 
as a U.S. delegate of the Palau EAG, nor as a member of the EAG itself. 
Accordingly, all EAG-related comments here are strictly and exclusively 
my own, and not in any way to be attributed to the EAG, or either of 
its bi-national founders.
    Of great concern to broader U.S. economic and national security 
interests is the degradation of the U.S. Tuna Fleet, with a review of 
the same, with specific reference to the need to enhance and secure the 
economy of American Samoa. And, as we consider the further regional 
engagement of American Samoa, the CNMI and Guam, the reference to 
French Polynesia's Forum Associate Membership in the Pacific Island 
Forum (PIF) suggests consideration of a similar membership for our 
Pacific jurisdictions.

Modalities of Expanded U.S. Economic Engagement in the Pacific Islands:

i. The Role of TDA.

    One of the many positive outcomes of the Summit was the release of 
very useful new U.S. economic engagement programs. In this regard, a 
central outcome of the Summit was the White House's designation of TDA 
as the lead implementing agency of its newly created Pacific Island 
Strategic Infrastructure Initiative (PISII) and co-lead of the 
Transportation Partnership with the Pacific Islands (TPPI). These 
economic engagement initiatives aim to catalyze sustainable, climate-
smart infrastructure investment throughout the Pacific Islands using 
TDA's project preparation and partnership-building toolkit in sectors 
including clean energy, transportation, digital and healthcare 
infrastructure.

    To help fulfill these commitments, in late February 2022 and early 
March 2023, TDA engaged in scoping missions to the Pacific Islands, 
with stops in Federated States of Micronesia, Fiji, Palau, the Republic 
of Marshall Islands, Samoa, and Tonga. These scoping missions served as 
opportune visits to establish new engagement partnerships and directly 
solicit infrastructure proposals from key Pacific Island markets.

    As known, these island countries face unique challenges, including 
pronounced climate change impacts, severe weather events, limited 
digital and transport connectivity, supply chain disruptions, and food 
security issues, among others. Discussing these challenges firsthand 
enabled TDA to assess current infrastructure needs and discuss 
potential ways to partner with local public and private sector entities 
to advance sustainable infrastructure solutions.

    TDA participated in the U.S.-Pacific Islands Trade and Investment 
Dialogue Senior Officials Meeting, led by the Office of the U.S. Trade 
Representative, and met with ministries and private sector partners 
across the Pacific Islands to discuss potential areas of cooperation. 
They are now evaluating potential project leads for the modernization 
and buildout of ports and airports, cold storage facilities, digital 
infrastructure, telemedicine and healthcare solutions, electrical grids 
and clean energy.

    During the scoping missions, TDA announced the expansion of its 
signature regional aviation initiative, which is now called the U.S.-
Southeast Asia and Pacific Islands Aviation Cooperation Program. The 
initiative will now undertake dedicated programming across the Pacific 
Islands. Looking forward, USTDA will also host a Pacific Island Country 
delegation to the United States for a Ports Modernization Reverse Trade 
Mission, scheduled for fall 2023.

    TDA bookended its scoping missions with visits to New Zealand and 
Australia, with whom the Agency has partnered to jointly support 
quality infrastructure and human capacity building to advance the 
resilience and prosperity of the Pacific Islands. TDA is also 
supporting an open Call for Proposals for the Pacific Islands: Through 
the Pacific Islands Strategic Infrastructure Initiative, TDA issued 
this call for proposals to utilize the full breadth of its toolkit to 
match the infrastructure priorities of Pacific Island countries with 
the technical innovation of U.S. companies.

    In a short amount of time, TDA has catalyzed new partnerships, to 
importantly include JBIC, concurrent with deepening its existing 
relationships in the Pacific Islands. Their efforts will soon lead to 
an expanded portfolio of project preparation and partnership-building 
activities that will promote sustainable infrastructure and greater 
economic resilience across the region, while introducing high-quality 
U.S. solutions. In short, TDA is on the front lines of Washington's 
engagement efforts to strengthen the U.S.-Pacific Partnership.

ii. The Role of Regional Engagement between TDA--DFC--JBIC--DFAT

    As China's intrusion in the region was more fully internalized in 
Washington, it was recognized that the U.S. needed to expand the 
mandate and funding of TDA's sister agency, the Overseas Private 
Investment Corporation (OPIC). As a consequence, OPIC was morphed into 
DFC, its role in assisting regional alliance engagement to contest the 
China threat is well-described here by DFC's CEO Scott Nathan: https://
www.dfc.gov/media/speeches-testimony/testimony-dfc-ceo-scott-nathan-
house-committee-foreign-affairs-0.
    TDA, for its part, not only provided catalytic support for DFC's 
regional project developers, but also expanded its reach there in May 
2022 by concluding a teaming arrangement with JBIC, which, in turn, was 
able to pivot off JBIC's equity and debt facilities, a significant 
capital multiplier outcome: https://ustda.gov/ustda-jbic-formalize-
global-partnership-on-infrastructure/
    The TDA tie-in with JBIC was preceded by JBIC's November 8, 2017 
teaming with OPIC, which was subsequently converted into an agreement 
with the new DFC on December 14, 2021: https://www.jbic.go.jp/en/
information/press/press-2020/0114-014177.html
    An even further expansion of regional finance capability took place 
on October 16, 2022 when DFC, JBIC, DFAT and Export Finance Australia 
(EFA) enhanced their collective collaboration: https://www.dfc.gov/
media/press-releases/joint-statement-united-states-japan-and-australia-
renewal-trilateral
    The benefit of this collective finance engagement took place in 
November 2022 at the Partnership for Global Infrastructure and 
Investment (PGII) event at the G20 Summit, where it was announced that 
DFC, JBIC and EFA would provide USD $50 million each provided to 
support Telstra's acquisition of Digicel Pacific. Digicel Pacific is 
the leading telecommunications operator in the Pacific, with over 2.5 
million subscribers in Papua New Guinea, Fiji, Vanuatu, Samoa, Tonga, 
and Nauru, with Telstra's acquisition of the same precluding a 
threatened Chinese acquisition of the same: https: / / 
www.whitehouse.gov / briefing-room / statements-releases / 2022 / 11 / 
15 / united-states-australia-japan-joint-statement-on-cooperation-on-
telecommunications-financing/
iii. The Role of a Significant American Tuna Fleet:

    Maintaining an active and viable U.S. tuna purse seine fleet 
operating in the strategically important central Pacific Ocean is vital 
for a number of reasons. First the fleet is based in American Samoa and 
supports the local economy by delivering tuna to the StarKist facility 
there, the largest private sector employer in the territory and by 
utilizing a range of goods and services provided by local businesses.
    The economy of American Samoa is overwhelmingly dependent on the 
tuna industry and the related service industries that support both the 
StarKist facility and vessels based there. The future of the U.S. purse 
seine fleet and the future of American Samoa are inextricably and 
undeniably linked.
    The activities of the fleet provide a critical counterbalance to 
China's growing influence across the region. As known, China has 
focused strategically on developing direct commercial ties with several 
Pacific Island States through investments in the fisheries sector, both 
through the activities of its vessels as well as shoreside investments. 
China understands that building commercial and industry ties is a the 
single most important vector for political and economic engagement.
    As a result, maintaining a viable American Samoa-based purse seine 
fleet operating in the Pacific Ocean contributes not only to the United 
States and American Samoan economy, but to regional food security, 
national security, and other vital national interests. The fleet also 
operates as numerous additional sets of ``eyes and ears'' across vast 
reaches of the Western and Central Pacific Ocean.
    And yet, the American Samoa-based fleet faces a number of 
challenges that risk further significant reductions in the number of 
vessels operating in the region. Frankly speaking, the fleet operates 
on an increasingly uneven playing field with respect to its 
international competitors, in particular China. China and other flag 
states are able to exempt their vessels from a range of international 
regulatory requirements by reflagging or entering into charter 
arrangements with Pacific Island States who themselves are exempt from 
these requirements.
    Moreover, although the underlying Convention requires that 
``Participating Territories'' such as American Samoa be afforded the 
same treatment as the Pacific Island States, the America Samoa-based 
fleet is not afforded these same exemptions creating a vastly 
disproportionate burden on the American Samoa economy.
    Finally, the fleet faces a number of regulatory challenges on the 
domestic front as well. Current initiatives being considered by the 
Administration would further limit access by the fleet to fish on the 
high seas, and potentially close remaining U.S. waters, that are not 
already closed to fishing, under an expanded Pacific Remote Islands 
National Marine Sanctuary.
    It is often said, because it is undeniably true, that fisheries are 
as central to the politics of the Pacific as oil is to the Middle East. 
Unless the United States is prepared to withdraw completely from 
engagement with the Pacific Island States on these strategically 
important fisheries issues, these trends affecting the American Samoa-
based fleet must be addressed and reversed, and soon. (In parallel, 
another burden to American Samoa's economy needs to be early addressed, 
that is raising the hourly wage there to the federal level.)
    Finally, another approach to adding fisheries value to American 
Samoa is to benefit from such as the Marshall Islands relationship with 
Taiwan and U.S. One innovative approach here is to have Taiwanese 
Bumblebee send fish it catches in Marshallese waters to American Samoa 
for processing, then export them from there--this simultaneously 
bringing RMI closer to controlling their fisheries.
Enhanced people-to-people Engagement:

    While certain US policy initiatives are already underway to enhance 
regional people-to-people engagement, an additional/intentional focus 
will be required to achieve lasting results. Plans for the return of 
the Peace Corps to many Pacific Island countries are well advanced, but 
final arrangements are still awaited for in Palau, the FSM and the 
Marshall Islands--the same being warmly welcomed and a strong signal of 
U.S. commitment.
    Similarly, continuation and even enhancement of the resident Civic 
Action Team in Palau, and a return to FSM and RMI, would bring very 
positive, mutually beneficial results.
    The US Department of Veterans Affairs should be encouraged to 
expand ways to improve access to VA health benefits for the substantial 
and growing number of veterans in the FAS.
    Another set of programs to consider were highlighted during the 
COVID-19 response in which US resources from HHS, CDC and other 
agencies, were deeply appreciated and highly effective. Making some 
such interactions more frequent or even permanent on the ground could 
yield equally admirable and long-lasting benefits.
    Programs to improve education in the FAS and to make US higher 
education affordable for FAS citizens would continue to enhance our 
linkages. Finally, the U.S. must improve its focus upon the rights and 
benefits FAS citizens enjoy while legally and productively residing in 
the U.S. and in U.S. territories. Fixing the mistakenly excluded 
Medicaid benefit was a good step.
    Addressing the Real ID problems faced for a period of years was 
another step. But too often Compact citizens living in the US face 
challenges green-card holders so not face. A pathway to citizenship 
afforded to immigrants from non-Compact nations is not afforded to 
Compact immigrants. The U.S. can and should address and redress 
inequities when possible, to further bolster US-FAS people-to-people 
engagement outcomes.
    In present close in this section relating to the importance of 
personal relationships, it useful to note the coincidence that, at this 
moment, the two most important women leaders in the Pacific are, 
respectively, the Prime Minister of Samoa, Fiame Naomi Mata'afa, and 
the Congresswoman from American Samoa, Aumua Amata Coleman Radewagen, 
who naturally graces this body.
Expanded Engagement in the Pacific Island Forum:

    Regarding expanded U.S. engagement in the region, it is noted that 
the Governor of Guam was the only U.S. territory Chief Executive to 
participate in the proceedings of the 2002 U.S. Pacific Islands Summit 
in Washington D.C., and after its conclusion the Governor announced 
that her local government administration would unilaterally seek 
Associate Membership in the Pacific Islands Forum (PIF).
    The U.S. historically has advised Guam and the PIF Secretariat that 
Observer status in that international organization is the only 
appropriate participation for Guam, American Samoa and the Northern 
Mariana Islands. That is, given the requirements of the American system 
of constitutional federalism, under which the President is the sole 
national voice in foreign affairs, with the result that neither states 
nor territories can go beyond participation as civil society observers 
in international proceedings in which foreign policy matters are 
deliberated.
    One wonders if this is not a constitutional cage of our own making.
    It is noted that the U.S. and France are among 19 nations that are 
not PIF members but allowed to participate as countries ``engaged'' in 
the region in the capacity of Forum Dialogue Partners. Yet, two French 
territories that had Observer status became Associate Members as a 
springboard to Full Member status. That includes New Caledonia, which 
like Guam is not fully self-governing, and French Polynesia, classified 
as an ``overseas country.''
    Meanwhile, Wallis and Fotuna is still a French possession in 
Observer status, demonstrating that one size does not fit all for 
France and PIF, just as it need not for U.S. and its other territories, 
especially if there are good domestic and/or international law reasons 
for differentiation.
    Similarly, Cook Islands and Niue are territorial dependencies of 
New Zealand, given the ``Free Associated State'' designation and PIF 
full membership, while Tokelau, New Zealand's small territory 
(population 1,383), is an Associate Member of PIF.
    While Australia and New Zealand have managed to expand beyond their 
colonial past and the French territories have been accepted by PIF 
despite France's nuclear testing legacy, the U.S. Pacific seems to be 
having an identity crisis about being a Pacific nation, and thereby 
precluding its small Pacific territories from regional roles that seem 
natural.
    If U.S. territories are not fully integrated into the U.S. 
constitutional system as are states, why should they not exercise some 
degree of international personality and integration in the regional 
community? Or, what if the U.S. applied for PIF membership and made 
Guam, American Samoa and Northern Mariana permanent members of the U.S. 
delegation? The people of the Pacific who remember that 100,000 
Americans died freeing them from brutal tyranny know the U.S. is a 
Pacific nation, but has the U.S. fully considered the benefits of 
either itself, or its Pacific Island Territories, in a far closer 
engagement with the PIF?
Palau: A Case-study in Enhanced U.S. Engagement:

    The Compacts of Free Association with the FSM, the RMI, and Palau 
present unique opportunities and unique challenges resulting from our 
history during the Post-World War II period.
    In particular, reference to Palau can show the Biden administration 
recognizing its importance by launching the Palau Economic Advisory 
Group on September 15th 2022: https://www.doi.gov/oia/press/Compact-
Mandated-Palau-Economic-Advisory-Group-Launched
    In proceeding with the EAG launch, the administration reversed 
twelve years of earlier inaction, with the EAG being (notionally) 
established on September 3, 2010, under the Agreement reached during 
the 15th Anniversary Review of the Compact of Free Association between 
the U.S. and Palau. In so launching the EAG, the administration has 
demonstrated its ability to move past periods of relative neglect.
    For its part, Palau appreciates the focus and attention on military 
relations as evidence by the consistent, twice-yearly meetings that 
provide a conducive environment and an opportunity to ensure mutually 
beneficial interactions. Palau appreciates the high-level visits it has 
received, including, among others, from the Secretary of Veteran's 
Affairs. The Secretary acknowledged the sacrifices--and the ongoing 
sacrifice--of Palauan citizens in the US military serving at a rate in 
proportion to population unmatched by any state of the United States  
likewise true of the FSM and Marshall Islands.
    So, what are my (again, strictly personal) observations as a member 
of the EAG? I see a nation that is a proud partner of the U.S. I see a 
nation that has broad and deep linkages with the U.S. as evidenced by 
the many Palauans alive today are resident in the U.S. mainland or a 
U.S. territory. I see a country that has been economically damaged by 
China's intentional ban on visitors from China to Palau, from a peak of 
over 90,000 visitors or 54 percent of the total in FY2015 to virtually 
none in a few years.
    I see a country which has been further damaged by the impact of 
COVID-19 on its tourism industry, causing economic activity to decline 
by nearly 30 percent from its peak. I see a country forced to borrow, 
albeit on concessional terms, to manage its way through the COVID-19 
pandemic while keeping its tourism industry on life support to survive 
until now. I see a country with inadequate and declining quality of its 
infrastructure--however the same is beginning to attract the attention 
of TDA/DFC/JBIC/DFAT-EFA.
    Accordingly, for the relevant reasons, I see a country poised to 
recover and prepared to deliver improved livelihoods to its current 
population, and to do its best to attract Palauans to return home with 
the education, skills and experience they have developed abroad  
mostly in the U.S.
    I welcome those with an interest in the comprehensive activities of 
the EAG since its launch to take a moment to review its First Annual 
Report, to appear when released on its web-site: https://pitiviti.org/
eag-meetings-reports
Conclusion:

    The United States has recently emerged from a period where it took 
its place and engagement in the Pacific Islands largely for granted. 
Many negative interests have taken full advantage of this period of 
hubris, clearly not least China. Armed with the knowledge of the 
profound negative effect of this laissez-faire, the U.S. has recently 
demonstrated it has a comprehensive range of economic engagement tools 
to bring to bear, not least that of TDA and DFC.
    And while this Hearing is not focused on the Compacts under 
`present hoped-for closure', the same when concluded will clearly be 
the signal to all parties how seriously the U.S. has reengaged. The 
administration's launching of the Palau Economic Advisory Group is a 
further strong positive signal the U.S. is fully committed in its 
regional role and status.

                                 ______
                                 

 Questions Submitted for the Record to Peter Watson, President & CEO, 
                            The Dwight Group

            Questions Submitted by Representative Westerman
    Question 1. Historically, what was the importance of the islands 
that now comprise the FAS and how does that importance show itself in 
the present competition for influence and control in the Indo-Pacific?

    Answer. It has been observed the CCP regime that rules the PRC 
appears in some respects to be seeking to accomplish in the Pacific 
Islands during the third decade of the 21st Century what Imperial Japan 
attempted to accomplish in the third decade of the 20th Century. That 
is, to use control of Oceania as a strategic and economic bridge to 
gain control and dominate the Indo-Pacific region.
    Imperial Japan used the League of Nations Mandate to establish a 
civilian governing system based in Koror, Palau, to expand its power 
projection to Saipan and across Micronesia to Chuuk and Majuro. PRC is 
using political and economic codependence to set the stage for by 
economic and strategic coercion as needed to achieve a dominant 
position throughout a region spanning 1/3 of the earth's surface.
    Surrounding Taiwan is one obvious purpose, and that is an 
imperative in any assessment of regional economic and political 
security threat. But of equal if not greater long-term interest to PRC 
is access of sea lines of communication that run directly through the 
FAS waters, islands and airspace.
    Just as Imperial Japan's creeping expansion across the region of 
small islands and big oceans included creeping militarization contrary 
to its LON mandate, the allies had to island hop to reverse Japanese 
aggression and drive imperial forces back to the homeland.
    To avoid conflict that can lead to war, the U.S. and its allies in 
our shared region must confront the political warfare and effectively 
counter the political disruption, and corruption tactics the PRC is 
waging to end democracy, free enterprise and rule-of-law in small 
Pacific nations that control large ocean areas in strategic locations.

    Question 2. How important are the FAS for the future of U.S. 
economic presence in the Indo-Pacific, as well as countering CCP 
aggression?

    Answer. Vitally. Together with the U.S. territories that extend the 
U.S. homeland into the Western Pacific, the FAS are centers of American 
economic and strategic national interest. U.S. economic assistance is 
an investment in peoples and nations that host critical military 
presence more important than ever to keep the peace.

            Questions Submitted by Representative Radewagen

    Question 1. Dr. Watson, you mention you wished to elaborate further 
on the American Samoa's fishing and the American Samoa Economic 
Development Credit. Could you please do that?

    Answer. That Congress has allowed the American Samoa Economic 
Development Credit (ASDEC)/Section 30A to lapse is very regrettable: 
Indeed it is extremely short-sighted. American Samoa is critical to the 
U.S. mainland as its irreplaceable security platform in the southern 
Pacific Islands--it's that simple.
    American Samoa depends on its tuna canning industry, the 
territories largest private employer and economic driver. With roughly 
2,300 workers, the tuna cannery in Pago Pago is the largest private 
sector employer in American Samoa, being responsible for nearly 20% of 
its workforce, and has relied heavily on the Section 30A tax credit. 
Local economic diversification cannot occur without a reauthorization 
of the tax credit. This will provide time to recover from the economic 
downturn and plan.
    The House Ways and Means Committee has previously voted out a five-
year extension, and Senator Murkowski offered an amendment for a five-
year extension, but same was not taken up.
    American Samoa is hopeful the Finance Committee will support a 
multi-year reauthorization which will help diversify its economy and 
give businesses the confidence to invest in American Samoa without 
having to worry about annual expiration.
    The Finance committee solved this problem for Puerto Rico and the 
U.S. Virgin Islands in an earlier tax reform bill providing them with a 
five-year extension for the rum tax cover over, a provision which 
scores substantially higher than the ASEDC. This is the time to rectify 
to extremely prejudicial situation in American Samoa--the anchor of 
U.S. national security in the lower Pacific Islands.

    Question 2. Do you see any path that would allow more participation 
by any of the Pacific territories in the Pacific Islands Forum; and not 
run afoul of the U.S. Constitution or the traditional authority of the 
President/ Executive branch in conducting foreign affairs?

    Answer. I was pleased to provide detail on this in my written 
testimony, but for emphasis, the U.S. federal government not only can 
and should facilitate a deeper engagement of the Pacific territories--
especially by American Samoa, as the U.S.'s only territory in the 
southern Pacific--but it should also strongly consider becoming a 
member itself. The U.S. had diplomatic representation in New Zealand in 
1938, years before itself acquired a Pacific coast: In short it well 
past due the United States moved to correct these PIF membership 
mistakes of the past.

               Questions Submitted by Representative Case

    Question 1. During my time for questions in our hearing, I misspoke 
when describing the Government Accountability Office's reported fiscal 
impact from Compact residents on local communities. I noted that 
localities collectively reported $1.8 billion in costs between 2004 and 
2018 when in reality that figure in the GAO report is $3.2 billion. If 
Congress were to expand the same eligibility for federal benefits to 
Compact migrants as are currently extended to lawful permanent 
residents, what uncovered costs from delivering still-uncovered 
services would host communities have to cover without federal aid?

    Answer. Local education costs may not be covered, for just one 
example. Also, it has been suggested by some that there were methodical 
deficiencies in past enumerations by OIA and Bureau of Census for 
purposes of allocating annal grants under Section 104(e) of the 2003 
COFA Amendments Act of 2003 (P.L. 108-188).
    Specifically, the practice of OIA and the Bureau for the last 20 
years has been to include U.S. citizens with origins in FAS as 
``qualified non-immigrants'' under Section 104(e), referred to a here 
as ``Compact Migrants.'' Since U.S. citizens do not enter of reside in 
U.S. under Section 141 of the COFA, the enumeration and costing of the 
program may be askew. Indeed, the record before the Subcommittee has 
reported that half of ``Compact Migrants'' are U.S. citizens, a 
distinction that could alter assessment on past and present costs for 
COFA impact payments.
    GAO also reported inconsistency and administrative discretion 
exercised in directing enumeration that had no basis in statute. That 
needs to be addressed and prevented.

    Question 2. Citizens of the Freely Associated States are eligible 
to join the U.S. military and frequently serve in our armed forces. 
What proportion of the population from the Freely Associated States 
joins the U.S. military compared to other U.S. communities? What are 
the challenges veterans in the Freely Associated States experience in 
accessing Department of Veterans Affairs health care and other benefits 
when they return home to their countries? What can be done to improve 
this?

    Answer. Thank you. I of course respect the resources of OIA, VA and 
Defense can best provide an accurate response to those questions; 
however, on the first I am aware that the FAS--and American Samoa--have 
its nationals serve in the U.S. armed forces at larger percentages than 
the far majority of U.S. states, if indeed more than all.

    Question 3. Funding for the Compacts of Free Association is 
currently borne by the Department of the Interior and the Biden 
administration suggests moving that funding the Department of State but 
to keep administration of the Compacts within the Department of the 
Interior. Given the critical role the Compacts of Free Association to 
our national security and to the Department of Defense, should the 
Department of Defense also bear some of these costs?

    Answer. Some believe Defense Department has been misinformed and 
misled into believing U.S. security and defense rights under COFA are 
``locked in'' and/or binding on FAS ``in perpetuity.'' That is a deeply 
flawed narrative that in some degree may have caused Defense to believe 
its commitment in FAS is limited to INDOPACOM operational programs and 
community relations activities involving in connection therewith, but 
that relations with Congress, State, Interior and NSC on COFA 
negotiations and approval are of limited efficacy and managed at a 
bureaucratic level.
    Defense should have a senior leadership and policy role and should 
be represented by full time assigned personnel in the COFA management 
and implementation process. The Defense budget should include 
contributions to the COFA economic and political package, as well as 
payment of operational and defense site costs as currently is the case.
    Whether the funding and federal domestic program coordination in 
the international setting is funded through State or Interior, Defense 
should play a prominent role in managing relations with the FAS under 
COFA.

    Question 4. Last year the administration released the first ever 
Strategy for Pacific Island Partnership along with a more detailed 
Roadmap to a 21st Century U.S. Pacific Islands Partnership. How was 
this and recent efforts to reengage the region seen by the Pacific 
Islands? What role can Congress play to help implement the Pacific 
Islands Partnership Strategy?

    Answer. U.S. engagement in region will always be welcome and 
appreciated. Right now the best measure is to approve a new federal law 
extending the COFA on terms Congress determines to best serve U.S. and 
FAS interests.

    Question 5. The Pacific Islands Forum, a critical inter-
governmental organization in the Pacific Islands region, laid out a 
regional vision for development of the Pacific Islands in its 2050 
Strategy for the Blue Pacific Continent. How can the United States 
support this strategy?

    Answer. As responded to in Congresswoman's follow-up question on 
the Pacific Island Forum, the U.S. federal government not only can and 
should facilitate a deeper membership engagement there of its Pacific 
territories--especially by American Samoa, as the U.S.'s only territory 
in the southern Pacific--but it should also strongly consider becoming 
a member itself. The U.S. had diplomatic representation in New Zealand 
in 1938, years before itself acquired a Pacific coast: In short, the 
way the U.S. can maximally support the development of the Pacific 
Islands in its 2050 Strategy for the Blue Pacific Continent is for it 
to become a full PIF member, and likewise have its Pacific territories 
have a deeper organic role in the same.

                                 ______
                                 

    Ms. Hageman. Thank you.
    The Chair now recognizes Mr. Gray for 5 minutes.

STATEMENT OF ALEXANDER GRAY, MANAGING PARTNER, AMERICAN GLOBAL 
            STRATEGIES, LLC, OKLAHOMA CITY, OKLAHOMA

    Mr. Gray. Thank you, Chairman Hageman, and Ranking Member 
Leger Fernandez, and members of the Committee for this 
opportunity to testify today on a matter of tremendous 
importance for the sovereignty and integrity of U.S. Pacific 
territories and insular areas, and that is countering the 
malign influence of the People's Republic of China.
    As the first-ever Director for Oceania and Indo-Pacific 
Security at the NSC from 2018 to 2019, I witnessed firsthand 
the PRC's growing influence across the Pacific, including in 
U.S. territories and insular areas.
    While PRC ambitions have received considerable media 
coverage and high-level official attention in places like the 
Solomon Islands and Papua New Guinea, there has been an 
alarming dearth of focus on Beijing's efforts to penetrate, 
influence, and subvert U.S. territories for which our 
government is directly responsible.
    While the United States has an extraordinary strategic 
interest in the integrity of the Freely Associated States, I am 
going to focus my attention in this testimony primarily on U.S. 
territories.
    In addition to the obligation the U.S. Government has to 
the integrity of these areas, they are strategically 
significant as the United States embarks on prolonged 
competition with the PRC. The territories of Guam, American 
Samoa, and the Commonwealth of the Northern Mariana Islands are 
in vital sea lanes, they host critical military infrastructure 
and assets, and they are integral parts of the Indo-Pacific 
economy.
    Additionally, the United States administers nine Pacific 
possessions, including Wake Island, Midway Atoll, and others 
that are likely to play important roles in that evolving U.S.-
PRC competition.
    The strategic reality in the region has made U.S. 
territories and possessions in the Pacific a prime target for 
PRC malign influence. As others have noted, this influence can 
come in many forms: propaganda, traditional espionage, 
influence operations targeted at elites, but also general 
public opinion, and more. U.S. Pacific territories have 
witnessed the full spectrum of PRC operations, but given their 
anomalous status within the U.S. Government and quirks of how 
the executive branch is organized, they fail to receive the 
attention and the resources to appropriately address the 
predations of the PRC.
    In my written testimony, I have laid out the various 
specific ways the PRC is exerting malign influence against U.S. 
territories in the Pacific. But I think just to encapsulate 
that, Washington needs to begin prioritizing the defense of 
U.S. Pacific territories and possessions the same way we would 
address those same actions against a U.S. state.
    To increase the responsiveness of senior levels of the U.S. 
Government to the threats facing our Pacific territories and 
possessions, it is time for the National Security Council to 
establish an interagency policy process chaired at the 
assistant secretary level by an appropriate NSC official to 
respond to threats to U.S. territories, and to integrate this 
response into our larger National Security Strategy. This 
process would need representation from across the U.S. 
Government.
    Just as a few specific examples of steps the government 
could and should take, we need to establish a director-level 
position at the National Security Council focused on the U.S. 
territories and possessions who can provide staff support to 
that policy process that I just mentioned.
    The Coast Guard is the entity most capable of defending and 
safeguarding U.S. sovereignty in the U.S. territories and 
possessions. They need additional resources to undertake that 
mission, including, I would add, continuing forward with the 
process of evaluating a permanent Coast Guard station in 
American Samoa.
    Additional bureaucratic fixes can be made to strengthen the 
hand of the U.S. Government in countering PRC malign activity 
in the region. That could include opening additional FBI field 
offices outside of Honolulu in our U.S. territories and 
possessions. It also means taking the PRC's economic assault on 
our Pacific territories more seriously, and integrating efforts 
by Departments of Commerce, Treasury, and Labor into a larger 
policy process to address challenges like what has happened to 
the cannery in American Samoa, which is a direct result of the 
PRC's economic coercion.
    Finally, U.S. territories and possessions in the Pacific 
are vital sovereign parts of the United States, and they are 
going to be instrumental in the conduct of our long-term 
competition with the PRC.
    In addition to the strategic rationale, we owe it to the 
Americans who call these islands home to structure the U.S. 
Government appropriately, apply the appropriate attention and 
focus to safeguarding them from malign interference and 
influence.
    The bureaucratic fixes I have outlined are just a beginning 
baseline for that process as we continue to reconfigure 
ourselves for the era of great power competition. Thank you 
again.

    [The prepared statement of Mr. Gray follows:]
                Prepared Statement of Alexander B. Gray
    Chairwoman Hageman and Ranking Member Fernandez, thank you for the 
opportunity to appear before the Subcommittee today to address an issue 
of the utmost importance to the sovereignty of the United States and 
the integrity of our Pacific territories and insular areas: countering 
the malign influence of the People's Republic of China (PRC).
    As the first-ever Director for Oceania and Indo-Pacific Security at 
the National Security Council (NSC) from 2018 to 2019, I witnessed 
firsthand the PRC's growing influence across the Pacific Islands, 
including in U.S. territories and insular areas. While PRC ambitions 
have received considerable media coverage and high-level official 
attention in places like Solomon Islands and Papua New Guinea, there 
has been an alarming dearth of focus on Beijing's efforts to penetrate, 
influence, and subvert territories for which the United States 
Government is directly responsible.
    While the United States has an extraordinary strategic interest in 
ensuring the integrity of the Freely Associated States (FAS) of the 
Republic of the Marshall Islands, the Republic of Palau, and the 
Federated States of Micronesia, I will not cover this matter 
extensively in my testimony today. It is imperative that the U.S. 
swiftly conclude extensions to the Compacts of Free Association with 
the FAS, and it is well-documented that the PRC is actively seeking to 
subvert the sovereignty of the FAS, weaken U.S. strategic interests in 
the FAS, and project malign influence for the purpose of strengthening 
Beijing's strategic-military objectives relative to the United States 
in the Micronesian Region. Renewing the Compacts forthwith is a matter 
of the utmost military, political, and economic urgency for the United 
States.
    Instead, I will primarily focus my remarks on the increasingly 
pernicious challenge posed by the PRC in U.S. territories and insular 
areas. In addition to the obligation the U.S. Government has to 
preserve the integrity of these areas, they are strategically 
significant as the U.S. embarks on a prolonged competition with the 
PRC. The territories of Guam, American Samoa, and the Commonwealth of 
the Northern Mariana Islands (CNMI) are located in vital Pacific sea 
lanes, host critical military infrastructure and assets, and are 
integral parts of the Indo-Pacific economy. Additionally, the U.S. 
administers nine Pacific possessions: Baker Island, Howland Island, 
Jarvis Island, Johnston Atoll, Kingman Reef, Midway Atoll, Palmyra 
Atoll, and Wake Island. These possessions also contain important 
strategic infrastructure, occupy critical Pacific geography, and will 
likely play important roles in the evolving U.S.-PRC competition.
    Approximately 265,000 Americans live in the three Pacific 
territories as citizens or nationals. The Pacific territories and 
possessions have over 1 million miles of Exclusive Economic Zone 
(EEZs); the Pacific possessions alone have over 750,000 miles. Since 
the beginning of America's acquisition of considerable Pacific 
territory in the 19th century, the strategic imperative outlined in the 
1820s by President John Quincy Adams has remained immutable: the 
``furnishing of commerce and fishery extending to the islands of the 
Pacific . . . still require that the protecting power of the Union 
should be displayed under its flag.'' American strategic interests in 
the Indo-Pacific, and particularly East Asia, require an extended 
presence across the great swathe of the Pacific to project power, 
protect commerce, and ensure the interests of the United States in the 
region and beyond. The growing Sino-American rivalry has only 
heightened this imperative.
    Guam, only about 1,500 miles from Japan, is home to roughly 7,000 
U.S. military personnel, including a U.S. Navy attack submarine 
squadron and ship repair facility, a major U.S. Air Force base, 
multiple U.S. Coast Guard cutters, and, over the next decade, 5,000 
relocated Marines from Okinawa. Tinian, in the CNMI, will serve as an 
alternate airfield for U.S. military aircraft.
    American Samoa, about 2,000 miles north of New Zealand in the 
Polynesian island group of the South Pacific, is the focus of a 
feasibility study on whether to base Coast Guard Fast Response Cutters 
there to uphold regional security and assist local partners in 
countering China's malign activity. It has tremendous latent capacity 
for the projection of U.S. power in the South Pacific at a time of 
increased PRC interest in that subregion.
    The United States' Pacific possessions (grouped collectively as the 
Minor Outlying Islands) are strategically vital. Located in the North 
Pacific along the same critical sea lanes between the U.S. West Coast 
and East Asia that had originally prompted their acquisition in the 
nineteenth century, these small islands provide sovereign American 
territory in the vast expanse of the Pacific.
    For example, situated between Hawaii and Guam, Wake Island is 
undergoing an $87 million upgrade by the U.S. Air Force to better 
support flight operations. Both Midway Atoll and Johnston Atoll 
previously housed U.S. military installations and could be reactivated 
to provide additional U.S. power projection across the North Pacific, 
particularly as the PRC seeks to put U.S. facilities like Guam under 
missile threat. The flexibility offered by these possessions is an 
exceptional strategic opportunity for the U.S. in the Pacific.
    These strategic realities have made the U.S. territories and 
possessions in the Pacific a prime target for PRC malign influence. As 
others have noted, this influence can come in many forms: propaganda, 
traditional espionage, influence operations targeted at both elites and 
general public opinion, and more. The U.S. Pacific territories have 
witnessed the full spectrum of PRC operations but, given their 
anomalous status within the U.S. Government and quirks in U.S. 
Executive Branch organization, have failed to receive the attention and 
resources needed to appropriately address Beijing's predations.
    Some of these PRC efforts have been unique to the Pacific 
territories. The CNMI, for instance, has been inundated by the ``birth 
tourism'' phenomenon emanating from the PRC and encouraged by a parole 
visa program initiated under the Obama administration. Birth tourism 
has overwhelmed the CNMI's medical capacity, and, in recent years, 
foreign births have exceeded native ones there. At the same time, four 
of China's largest construction firms and a major casino operator were 
found by U.S. authorities to be persistently paying local workers below 
the minimum wage. Local CNMI officials have repeatedly raised concerns 
about pernicious PRC practices that destabilize the local economy and 
place undue pressure on CNMI's social cohesion.
    Across U.S. territories and possessions in the Pacific, China's 
malign activity is damaging local economies and the regional ecology. 
Persistent and pervasive illegal, unreported, and unregulated (IUU) 
fishing by PRC vessels has been common in American Samoa, Guam, the 
CNMI, and as far east as Hawaii. Overfishing and depleted stocks have 
roiled territorial economies, with a tuna cannery on American Samoa, 
one of the island's largest employers, even temporarily suspending 
operations due to lack of fish.
    The PRC also regularly intrudes into EEZs across the region, 
including with hydrographic survey ships and even with auxiliary 
general intelligence vessels (AGIs), which have entered EEZs as far as 
Hawaii or northern Australia. Such unfettered activity by PRC vessels 
can provide critical information to counter U.S. Navy submarine 
activity, compromise undersea cables, and establish underwater 
surveillance systems. Without a regular air or sea presence across this 
vast region, the U.S.'s ability to ensure the integrity of its 
territories' EEZs is in question.
    Washington must begin the process of prioritizing the defense of 
U.S. Pacific territories and possessions from PRC predation while also 
reorganizing itself to address these challenges in a systematic manner. 
First, the U.S. Government must treat the above mentioned PRC 
misbehavior with the same seriousness with which it would similar 
attacks on a U.S. state. The Americans who reside in our Pacific 
territories and possessions deserve nothing less.
    To increase the responsiveness of the senior-levels of the U.S. 
Government to the threats facing the Pacific territories and 
possessions, it is time to establish a National Security Council-led 
interagency policy process (chaired at the assistant secretary-level by 
an appropriate NSC official) to respond to threats to U.S. territories 
and possessions and integrate this response into the larger National 
Security Strategy, especially with regards to PRC competition. Such a 
process would have appropriate representation from relevant agencies, 
including but not limited to the Departments of the Interior, State, 
Defense, and Homeland Security.
    Additionally, the NSC should create a cross-functional Director-
level position focused on the U.S. territories and possessions who can 
provide staff support to the aforementioned policy process. This 
official would provide needed accountability for elevating awareness of 
the needs of the territories and possessions within the policy process, 
and ensure that other U.S. Government policy processes are reflecting 
the realities facing the territories and possessions.
    The U.S. Coast Guard is the entity most capable of enforcing U.S. 
sovereignty and safeguarding vital interests across the Pacific 
territories and possessions. Whether it is enforcing EEZs in the Minor 
Outlying Islands, preventing IUU fishing across the Pacific, or 
countering narcotics and human trafficking, the Coast Guard is an 
essential tool in blunting Beijing's assault on U.S. territories. A 
substantially increased Coast Guard presence in American Samoa, Guam, 
and CNMI will be needed in the years ahead. While it continues to be 
under-resourced relative to the scale of its missions, creative 
thinking in Washington should be applied to allocate existing resources 
in pursuit of what should be a strategic imperative: the defense of the 
Pacific territories and possessions.
    Additional bureaucratic fixes can be made to strengthen the hand of 
the U.S. Government in countering PRC malign activity in our 
territories and possessions. For instance, the Federal Bureau of 
Investigation (FBI) manages its Pacific operations from Honolulu. Given 
the scale of PRC operations in the Western Pacific, an additional field 
office on Guam and satellite offices, appropriately manned, in CNMI and 
American Samoa would support both defensive efforts but also assist in 
wider-regional intelligence and counterintelligence operations with 
Pacific Islands partners.
    The PRC's economic assault in territories like CNMI and American 
Samoa deserves special attention. While there has been increased 
awareness of Beijing's strategies of economic aggression broadly, their 
effectiveness and the unique vulnerabilities of U.S. Pacific 
territories to those strategies has received insufficient attention. As 
part of the previously proposed NSC-led policy process, the Departments 
of Commerce, Treasury, Labor and appropriate regulatory bodies must pay 
particular attention to proposed projects and investments from foreign 
entities in U.S. Pacific territories. These projects not only pose 
threats to social cohesion and economic well-being but also pose 
potential strategic challenges. Simply because our territories are far 
from Washington does not mean the U.S. Government can fail to apply a 
vigorous lens to potential threats.
    U.S. territories and possessions in the Pacific are vital parts of 
the United States and will be instrumental in our conduct of long-term 
competition with the PRC. In addition to the strategic rationale, we 
owe it to the Americans who call these islands home to structure the 
U.S. Government appropriately, and apply the appropriate attention and 
focus, to safeguarding them from malign interference and influence. The 
bureaucratic fixes outlined above offer a beginning baseline for that 
process as the U.S. continues to reconfigure for the era of Great Power 
competition.
    Again, I thank the Chair and Ranking Member for the opportunity to 
appear before you today and I look forward to your questions.

                                 ______
                                 

Questions Submitted for the Record to Alexander Gray, Managing Partner, 
                       American Global Strategies

            Questions Submitted by Representative Westerman
    Question 1. What current military presence does the US have in the 
Indo-Pacific, and what potential is there to grow our military 
presence? Is this something you deem as crucial to combating CCP 
influence and aggression in the region?

    Answer. The U.S. military presence in the Indo-Pacific is currently 
focused on forward deployed forces in Japan, South Korea, and Guam, 
with Hawaii serving as the locus of the Indo-Pacific military effort 
through its headquartering of both U.S. Indo-Pacific Command and U.S. 
Pacific Fleet. Guam is currently undergoing a long-anticipated 
transition of forces from Okinawa, Japan, primarily Marine Corps 
assets, which will both strengthen Guam's role in U.S. forward-deployed 
defense while hopefully alleviating some of the pressures Okinawa has 
faced by hosting large numbers of U.S. forces. American Samoa currently 
lacks any notable U.S. military presence, but should be strongly 
considered for a permanent U.S. Coast Guard facility and the basing of 
USCG cutters to project power across the South Pacific. Additional Navy 
and Coast Guard assets positioned in CNMI and resources devoted to 
strengthening alternative airfield infrastructure in the Minor Outlying 
Islands (e.g. Wake, Midway, etc.) would provide additional options for 
the U.S. in the ongoing competition with the CCP. Finally, as the 
Compacts of Free Association are hopefully renewed, there are 
opportunities to strengthen rotational U.S. military deployments in 
Palau and FSM, in addition to the permanent presence at Kwajalein in 
RMI. Palau, in particular, can serve as an important alternative site 
for critical infrastructure given its proximity to both Guam and 
Okinawa.

    Question 2. How do you assess the political risk that one or more 
of the FAS will decide to change partner of choice and realign with PRC 
or some other power hostile to the U.S. over the next 20 years, or any 
time in the future? What must U.S. do to reduce this risk?

    Answer. While there is certainly political risk that PRC/CCP 
influence operations will succeed in creating pockets of support within 
the FAS (FSM, Palau, RMI) over the next two decades, I am less 
concerned by a complete realignment toward the PRC in any of the three 
polities. Pacific Island states seek to hedge against both Great Power 
competitors to the extent possible, and a complete realignment given 
the historical and economic connections with the U.S. would present 
significant practical difficulties. However, to combat CCP influence 
and the emergence of pockets of support in the FAS that seek to promote 
PRC/CCP interests, it is critical for the U.S. to place its long-term 
relationship with the FAS on a more permanent footing through renewed 
COFAs while also taking concrete steps to push back against PRC/CCP 
influence operations that undermine island sovereignty.

               Questions Submitted by Representative Case

    Question 1. During my time for questions in our hearing, I misspoke 
when describing the Government Accountability Office's reported fiscal 
impact from Compact residents on local communities. I noted that 
localities collectively reported $1.8 billion in costs between 2004 and 
2018 when in reality that figure in the GAO report is $3.2 billion. If 
Congress were to expand the same eligibility for federal benefits to 
Compact migrants as are currently extended to lawful permanent 
residents, what uncovered costs from delivering still-uncovered 
services would host communities have to cover without federal aid?

    Answer. While not an expert in ``Compact Impact'' issues, I 
recognize the immense importance of ensuring that host communities are 
not exposed to undue costs associated with Compact migration. Such 
costs undermine political support for the Compacts, with serious 
adverse national security impacts. I have long encouraged the national 
security community to take seriously the threat posed by ``Compact 
Impact'', if unaddressed, to undermine the political will needed to 
sustain healthy, long-term relationships with the FAS.

    Question 2. Citizens of the Freely Associated States are eligible 
to join the U.S. military and frequently serve in our armed forces. 
What proportion of the population from the Freely Associated States 
joins the U.S. military compared to other U.S. communities? What are 
the challenges veterans in the Freely Associated States experience in 
accessing Department of Veterans Affairs health care and other benefits 
when they return home to their countries? What can be done to improve 
this?

    Answer. It is my understanding that, collectively and as a 
percentage of population, citizens of the FAS serve in the U.S. 
military at a higher rate than any U.S. state. That is a tremendous 
credit to the citizens of Palau, FSM, and RMI, and something that U.S. 
leaders should never cease to emphasize in interactions with their FAS 
counterparts. Unfortunately, as has been demonstrated repeatedly since 
the Iraq and Afghanistan conflicts, the Department of Veterans Affairs 
lacks infrastructure in the FAS to address the types of injuries 
sustained in recent conflicts. Many FAS veterans lack the resources to 
travel to the closest available VA facilities. I encourage Congress to 
examine additional funding for FAS veterans to travel to VA facilities 
where their needs can be met, as well as establishment of satellite 
facilities in the FAS to treat some conditions (mental health being an 
area of significant attention). The obligations owed to our FAS 
veterans is significant, and the relationships forged through military 
service are a major strategic advantage to the U.S. in the region.

    Question 3. Funding for the Compacts of Free Association is 
currently borne by the Department of the Interior and the Biden 
administration suggests moving that funding the Department of State but 
to keep administration of the Compacts within the Department of the 
Interior. Given the critical role the Compacts of Free Association to 
our national security and to the Department of Defense, should the 
Department of Defense also bear some of these costs?

    Answer. The Department of Defense is the largest strategic 
beneficiary of the COFAs through their access to the FAS and right of 
denial to other strategic competitors. DoD, given its budget and the 
benefits gained from the FAS, should be the largest budgetary 
contributor to the COFAs. Interior should continue to manage COFA 
assistance and State has a key role in managing the relationships with 
sovereign states, but DoD must take a large proportion of the financial 
obligation given the strategic benefits.

    Question 4. Last year the administration released the first ever 
Strategy for Pacific Island Partnership along with a more detailed 
Roadmap to a 21st Century U.S. Pacific Islands Partnership. How was 
this and recent efforts to reengage the region seen by the Pacific 
Islands? What role can Congress play to help implement the Pacific 
Islands Partnership Strategy?

    Answer. Congress can help the recent Pacific Islands strategy by 
ensuring steady funding for key initiatives, like reopening U.S. 
embassies in the Pacific and bringing the Peace Corps back to the 
region. Pacific states are justifiably skeptical of U.S. commitment to 
the region, given American distraction over the last thirty years, and 
Congress should provide the resources to help alleviate that 
skepticism. Swift approval of the COFAs would also strengthen 
perceptions of American staying power.

    Question 5. The Pacific Islands Forum, a critical inter-
governmental organization in the Pacific Islands region, laid out a 
regional vision for development of the Pacific Islands in its 2050 
Strategy for the Blue Pacific Continent. How can the United States 
support this strategy?

    Answer. The U.S. can utilize a whole-of-government approach to 
assist the Pacific Islands meet the challenges they face, whether IUU 
fishing or environmental threats. Bringing the entire USG, from the EPA 
to the Fish and Wildlife Service to the DEA to the USDA, to engage to 
address challenges Pacific Island states actually face (soil erosion, 
rising sea levels, etc.) will help implement the strategy put forth. 
Congress can provide critical oversight to ensure the USG is working 
holistically to execute and implement this strategy.

                                 ______
                                 

    Ms. Hageman. Thank you.
    The Chair now recognizes Mr. Grossman for 5 minutes.

 STATEMENT OF DEREK GROSSMAN, SENIOR DEFENSE ANALYST, THE RAND 
             CORPORATION, SANTA MONICA, CALIFORNIA

    Mr. Grossman. Good afternoon, Chair Hageman, Ranking Member 
Leger Fernandez, and distinguished members of the Subcommittee. 
Thank you for inviting me to speak today.
    Beijing is pursuing three interrelated objectives in the 
Pacific, which include eliminating Taiwan's diplomatic space; 
accessing natural resources and generating economic activity; 
and breaking through the U.S. military's domination of the 
second island chain.
    China's strategy toward the Pacific Island countries is 
also playing out in the FAS, a region of keen geostrategic 
interest to the United States. As my RAND colleagues and I 
discussed in a 2019 report to Congress, the FAS are critical 
enablers of U.S. military operations that support the United 
States' Indo-Pacific strategy.
    Marshall Islands is one of the four nations in Oceania that 
diplomatically recognizes Taiwan over China. Because it has 
limited influence over the Marshall Islands, Beijing may be 
attempting to find ways to covertly secure its economic 
interests there. For example, two Chinese nationals who have 
also become naturalized Marshallese citizens conspired to 
establish the Rongelap Atoll Special Administrative Region 
within Marshall Islands, potentially giving Beijing access to 
natural resources and fishing in the future. Rongelap is also 
near the U.S. Ronald Reagan missile defense test site on 
Kwajalein Atoll, potentially raising spying concerns.
    The Federated States of Micronesia is the only state within 
the FAS that diplomatically recognizes China over Taiwan. As a 
result, Chinese contacts with state governments and state 
officials are numerous. In 2014, the two nations created the 
Commission on Economic Trade Cooperation. China's economic 
relationship with FSM includes substantial trade and aid 
components. Additionally, the FSM is a participant in China's 
global infrastructure and investment program known as Belt and 
Road Initiative.
    Like Marshall Islands, Palau also recognizes Taiwan over 
China, which has made it a target of Chinese pressure. Most 
notably, Chinese tourism to Palau ramped up for years until 
suddenly, in November 2017, Beijing barred tourists from 
traveling to this pristine vacation spot. It appears that 
Beijing's move was in retaliation for Palau's refusal to switch 
diplomatic recognition.
    And because the South China Sea is now practically devoid 
of fishery resources, Chinese fishermen are going farther 
afield in search of these resources, including within Palau's 
Exclusive Economic Zone. This is causing new security concerns. 
For example, in December 2020, with the assistance of the U.S. 
Coast Guard, Palauan authorities discovered 28 Chinese 
fishermen poaching sea creatures within its EEZ, and Palau 
deported them.
    Although they do not face diplomatic pressure from China 
because they are U.S. territories, American Samoa, Commonwealth 
of the Northern Mariana Islands, as well as Guam, nonetheless 
are dealing with a variety of Chinese economic and security 
threats.
    For American Samoa, Chinese illegal, unreported, and 
unregulated fishing activities have depleted tuna stocks within 
its EEZ and disrupted the local economy, even to the point of 
forcing a tuna cannery there, which is one of the island's 
largest employers, to temporarily suspend operations due to a 
lack of tuna availability. The Biden administration has been 
considering a Trump-era plan to station a U.S. Coast Guard 
cutter in American Samoa, in part to deter and intercept 
Chinese IUU fishing activities.
    CNMI primarily faces a potential economic threat from China 
as well, due to the fact that CNMI's economy is highly 
dependent on tourism coming from China. As we have seen with 
Palau and countries outside of Oceania, it is quite easy for 
Beijing to exact retaliation against those it harbors 
disagreements with by ending Chinese tourism to these 
destinations.
    And for Guam, the primary Chinese threat is military in 
nature. Because Guam is home to U.S. Navy, Air Force, and, as 
of January, a Marine Corps base, the island has become an 
attractive target for China to disrupt or disable in the run-up 
to or during military operations against Taiwan or in the East 
or South China Sea. Indeed, Chinese social media has referred 
to its military's DF-26 intermediate range ballistic missile as 
the ``Guam killer missile.'' Meanwhile, in April of this year, 
China also sent a carrier group featuring its Shandong aircraft 
carrier into waters approximately 400 miles off the coast of 
Guam.
    I have many recommendations detailed in my written 
statement, but in the interest of time, here are three.
    First, consider Pacific-focused policy.
    Second, offer economic assistance to U.S. territories 
particularly susceptible to Chinese economic coercion.
    And third, provide additional maritime domain awareness and 
patrol capabilities to FAS and U.S. territories.
    Thanks again for the opportunity to testify today, and I 
look forward to your questions.

    [The prepared statement of Mr. Grossman follows:]
   Prepared Statement of Derek Grossman,\1\ The RAND Corporation \2\
---------------------------------------------------------------------------
    \1\ The opinions and conclusions expressed in this testimony are 
the author's alone and should not be interpreted as representing those 
of the RAND Corporation or any of the sponsors of its research.
    \2\ The RAND Corporation is a research organization that develops 
solutions to public policy challenges to help make communities 
throughout the world safer and more secure, healthier and more 
prosperous. RAND is nonprofit, nonpartisan, and committed to the public 
interest. RAND's mission is enabled through its core values of quality 
and objectivity and its commitment to integrity and ethical behavior. 
RAND subjects its research publications to a robust and exacting 
quality-assurance process; avoids financial and other conflicts of 
interest through staff training, project screening, and a policy of 
mandatory disclosure; and pursues transparency through the open 
publication of research findings and recommendations, disclosure of the 
source of funding of published research, and policies to ensure 
intellectual independence. This testimony is not a research 
publication, but witnesses affiliated with RAND routinely draw on 
relevant research conducted in the organization.

            Chinese Strategy in the Freely Associated States

                and American Territories in the Pacific:

                   Implications for the United States

    For decades, Beijing considered the Pacific Islands part of China's 
``periphery'' [zhoubian], or neighboring region.\3\ Despite their 
geostrategic value to Japan during World War II, Beijing had virtually 
ignored this part of the world in favor of focusing on ``major 
powers,'' such as the United States and Russia, as well as countries 
that share borders with China and other parts of the developing world, 
such as Africa. In recent years, however, Chinese attention has 
increasingly included Oceania, probably in no small part due to China's 
growing economic and military power and corresponding global interests. 
Indeed, Chinese President Xi Jinping in 2015 referred to the South 
Pacific as the ``southern leg'' of the ``Maritime Silk Road,'' which 
eventually became part of the global investment and infrastructure 
program, known as the Belt and Road Initiative (BRI), and his signature 
economic program.\4\
---------------------------------------------------------------------------
    \3\ Timothy R. Heath, Derek Grossman, Asha Clark, China's Quest for 
Global Primacy: An Analysis of Chinese International and Defense 
Strategies to Outcompete the United States, RAND Corporation, RR-A447-
1, 2021, p. 40, https://www.rand.org/pubs/research_reports/RRA447-
1.html.
    \4\ National Development and Reform Commission, ``Vision and 
Actions on Jointly Building Silk Road Economic Belt and 21st Century 
Maritime Silk Road,'' Ministry of Foreign Affairs and Ministry of 
Commerce, People's Republic of China, 2015.
---------------------------------------------------------------------------
    The purpose of this testimony is threefold. First, I outline the 
broad contours of Chinese strategy toward the Pacific Islands region. 
Next, I provide an analysis of Chinese strategy specifically in areas 
of relevance to the Committee, including the Freely Associated States 
(FAS)--composed of Marshall Islands, Federated States of Micronesia 
(FSM), and Palau--as well as U.S. territories in the Pacific, including 
American Samoa, the Commonwealth of the Northern Mariana Islands 
(CNMI), and Guam. Finally, I submit several policy recommendations for 
Congress and the U.S. Government to consider going forward.

China's Strategy in the Pacific Islands

    Although mainstream interest in China's strategy toward the Pacific 
has been growing in recent years, Western and Chinese scholarship on 
the subject remains thin compared with other regions, making it more 
difficult to discern the true nature of Beijing's objectives there.\5\ 
Nevertheless, the available scholarly literature generally coalesces 
around China pursuing three interrelated objectives in the Pacific (not 
necessarily in rank order): (1) eliminating Taiwan's diplomatic space, 
(2) accessing natural resources and generating economic activity, and 
(3) breaking through the U.S. military's domination of the second 
island chain.\6\ Differences among experts, whether Western or Chinese, 
usually stem from emphasizing one driver over another, but the debate 
is simply a matter of degree: Most, if not all, researchers recognize 
that China's Pacific strategy is the product of these three factors 
working together. Our research at the RAND Corporation draws this same 
conclusion.
---------------------------------------------------------------------------
    \5\ This section draws from my previous congressional testimony on 
China's strategy in the Pacific delivered to the U.S.-China Economic 
and Security Review Commission on August, 3, 2022. See Derek Grossman, 
China's Gambit in the Pacific: Implications for the United States and 
Its Allies and Partners, RAND Corporation, CT-A2198-1, 2022, https://
www.rand.org/pubs/testimonies/CTA2198-1.html.
    \6\ Ethan Meick, Michelle Ker, and Han May Chan, China's Engagement 
in the Pacific Islands: Implications for the United States, U.S.-China 
Economic and Security Review Commission, June 14, 2018, p. 1. One 
recent study of interest surveys and interviews 39 Chinese scholars on 
Beijing's top goals in the Pacific. It found that pursuing Chinese 
economic interests were paramount, although reducing Taiwan's 
diplomatic space was also important. For more, see Denghua Zhang, 
``China's Motives, Influence, and Prospects in Pacific Island 
Countries: Views of Chinese Scholars,'' International Relations of the 
Asia-Pacific, September 17, 2021. Another study places more emphasis on 
the economic aspects of China's strategy in the Pacific (Jenny Hayward-
Jones, ``Big Enough for All of Us: Geo-Strategic Competition in the 
Pacific Islands,'' Lowy Institute, May 16, 2013). A separate study 
argues that Beijing's economic agenda in the Pacific is helping China 
carve out a new ``sphere of influence'' meant to challenge the United 
States' and Australia's current spheres (Yu Lei and Sophia Sui, 
``China-Pacific Island Countries Strategic Partnership: China's 
Strategy to Reshape the Regional Order,'' East Asia, Vol. 39, March 
2022). Other experts have emphasized the geostrategic implications of 
China's approach to the Pacific. See, for example, Jonathan Pryke, 
``The Risks of China's Ambitions in the South Pacific,'' Brookings 
Institution, July 20, 2020; and Terence Wesley-Smith and Graeme Smith, 
The China Alternative: Changing Regional Order in the Pacific Islands, 
Australian National University Press, 2021.
---------------------------------------------------------------------------
    Regarding China's goal to eliminate Taiwan's diplomatic space, 
Oceania is home to four of Taipei's remaining 13 official diplomatic 
partners worldwide: Marshall Islands, Nauru, Palau, and Tuvalu. 
Notably, two Pacific Island countries--Solomon Islands and Kiribati--
switched their diplomatic recognition in 2019 from Taiwan to China, 
underscoring how quickly Taipei can lose diplomatic ground to Beijing 
in this contested region.
    China also wants to access natural resources in the Pacific. Most 
significantly, as fisheries dwindle in the nearby South China Sea due 
to a combination of coral reef destruction for artificial island 
construction, overfishing, pollution, and climate change, Beijing has 
sought to make up losses farther afield.\7\ According to one recent 
study, Beijing's distant-water fishing fleet, defined as ships fishing 
outside internationally recognized exclusive economic zones (EEZs), 
numbered 2,701 ships in 2020, easily making it the world's largest.\8\ 
The problem is that in order to satisfy the tastes of China's 
burgeoning middle class, Beijing--without respect for international 
commercial and environmental standards--incentivizes fleets to haul in 
as much seafood as possible (tuna and sea cucumbers, in particular), 
resulting in massive numbers of illegal, unreported, and unregulated 
(IUU) fishing incidents.\9\ According to the study, from 2015 to 2019, 
Beijing's fleets committed the most incidents of IUU fishing on the 
high seas, and the second- and third-most frequent locations for 
Chinese IUU fishing were in the Western/Central Pacific and South 
Pacific, respectively.\10\ These regions are home to the Pacific Island 
countries. Besides finding additional fishery stocks to tap, China is a 
huge proponent of deep-sea mining access to hunt for important metals, 
such as nickel, cobalt, copper, and manganese.\11\ Beijing also mines 
land resources. While Pacific Island nations generally do not have much 
land mass, Beijing, for years, has been exploiting gold and nickel 
mines, liquefied natural gas, and timber in Papua New Guinea.\12\
---------------------------------------------------------------------------
    \7\ U. Rashid Samaila, William W.L. Cheung, Louise S.L. Teh, et 
al., Sink or Swin: The Future of Fisheries in the East and South China 
Seas, ADM Capital Foundation, 2021.
    \8\ Environmental Justice Foundation, The Ever-Widening Net: 
Mapping the Scale, Nature and Corporate Structures of Illegal, 
Unreported and Unregulated Fishing by the Chinese Distant-Water Fleet, 
March 2022, p. 11.
    \9\ Blake Herzinger, ``China Is Fishing for Trouble at Sea,'' 
Foreign Policy, November 20, 2020.
    \10\ Environmental Justice Foundation, 2022, p. 25.
    \11\ Denghua Zhang, ``China Looking Under the Sea for Opportunities 
in the Pacific,'' East Asia Forum, June 30, 2018.
    \12\ Meick, Ker, and Chan, 2018, p. 7.
---------------------------------------------------------------------------
    Finally, on the military objective of breaking through the second 
island chain, Beijing seeks to weaken U.S. partnerships in the Pacific 
that afford the United States military advantages, which could be 
leveraged against China during a Taiwan, South or East China Sea, or 
even Korea scenario.\13\ Admittedly, the last time RAND researchers did 
an in-depth analysis of Chinese primary source literature on this 
subject in 2018, the record was scant, probably because Beijing had not 
been paying much attention to the Pacific Islands region; it will be 
interesting to see whether this changes over time. Nonetheless, there 
are several examples from the past decade worth noting here. One 
Chinese scholar, Qi Huaigao of Fudan University, outlined in 2014 how a 
school of contemporary Chinese foreign policy thinking viewed the 
development of ties in the Pacific as necessary to achieve ``maritime 
breakthroughs'' past encircling external powers.\14\ Another Chinese 
expert, Zhang Ying of Beijing Foreign Studies University, wrote in 2016 
that the ``South Pacific region . . . hinders China's expansion into 
the deep sea.'' \15\ And Xu Xiujun, a scholar at the Chinese Academy of 
Social Sciences, concurred with Zhang's assessment. Xu added in 2014 
that U.S. military presence in the region will very likely play a key 
role in U.S. efforts to contain China.\16\
---------------------------------------------------------------------------
    \13\ For an assessment of Chinese conceptions of the Second Island 
Chain, see Andrew S. Erickson and Joel Wuthnow, ``Barriers, 
Springboards and Benchmarks: China Conceptualizes the Pacific `Island 
Chains,' '' China Quarterly, No. 225, March 2016.
    \14\ Qi Huaigao [Chinese], ``Thoughts on the Top Design of 
Periphery Diplomacy'' [``Chinese''], Journal of International Relations 
[Chinese], Forum of World Economics and Politics [Chinese], No. 4, 
2014, p. 15.
    \15\ Zhang Ying [Chinese], ``China's Strategic Choice in the South 
Pacific: Perspectives, Motivations and Paths'' [``Chinese''], 
Contemporary World and Socialism, No. 6, 2016, p. 132.
    \16\ Xu Xiujun [Chinese], ``The Diplomatic Strategy of China to 
Develop the Relations with the South Pacific Region'' [``Chinese''], 
Pacific Journal [Chinese], Vol. 22, No. 11, November 2014, p. 21.
---------------------------------------------------------------------------
    Beyond the literature, Beijing has engaged in behavior throughout 
the region that could eventually support the objective to puncture the 
second island chain. Most notably, in April 2022, China signed a 
security agreement with Solomon Islands to allow regular visits of 
Chinese navy ships and training of local law enforcement. Traditional 
regional powers--such as the United States, Australia, Japan, and New 
Zealand--are concerned that China might eventually leverage these 
activities to establish a permanent base in the region. Meanwhile, 
Beijing is assisting Kiribati to upgrade its airstrip on Canton Island, 
which is located just 1,500 miles off the coast of Hawaii. Tarawa 
claims the renovation will support tourism, but Washington believes it 
could be a future Chinese air base.\17\ In 2018, China reportedly was 
helping Vanuatu build a potentially dual-use wharf on Santo Island. At 
first, the Vanuatans dismissed concerns, but eventually they decided to 
end the project.\18\ Broadly, China is adding highly skilled defense 
attaches throughout the Pacific Island countries--of which only three 
(Fiji, Papua New Guinea, and Tonga) have militaries--and is offering to 
train security officials, perhaps further enabling an operating 
presence in the region in the years to come.\19\
---------------------------------------------------------------------------
    \17\ Jonathan Barrett, ``Kiribati Says China-Backed Pacific 
Airstrip Project for Civilian Use,'' Reuters, May 13, 2021.
    \18\ Ben Bohane, ``South Pacific Nations Shrug Off Worries on 
China's Influence,'' New York Times, June 13, 2018.
    \19\ Denghua Zhang, ``China's Military Engagement with Pacific 
Island Countries,'' Asia and the Pacific Policy Society, August 17, 
2020.
---------------------------------------------------------------------------
    China seeks to achieve its three top objectives in the Pacific by 
leading with the least controversial and most attractive agenda to 
Pacific Island states. Then, over time, and as Pacific Island nations' 
trust in Beijing grows, China can leverage noncontroversial cooperation 
for more-sensitive benefits, such as accessing these nations' EEZs for 
fishing, switching their diplomatic allegiance from Taiwan to China, 
and establishing a military foothold in the region. As evidenced by the 
leaked China-Pacific Island Countries Common Vision Plan that then-
Chinese Foreign Minister Wang Yi brought to the region in late May 2022 
for concurrence among the Pacific Island nations, Beijing seeks to 
boost economic, pandemic-related, people-to-people, and climate change 
cooperation, among other initiatives.\20\
---------------------------------------------------------------------------
    \20\ ``China-Pacific Island Countries Common Development Vision,'' 
leaked draft, Australia Broadcasting Corporation News, undated, https:/
/www.documentcloud.org/documents/22037011-china-pacific-island-
countries-common-development-vision. Also, see Wang Yi's official 
statement on this vision statement at ``Wang Yi: The Comprehensive 
Strategic Partnership Between China and Pacific Island Countries Will 
Surely Achieve Steady and Sustained Growth,'' Ministry of Foreign 
Affairs of the People's Republic of China, May 30, 2022.
---------------------------------------------------------------------------
    Simultaneously, Beijing very likely employs information operations 
to control the narrative, such as by denigrating American, Australian, 
Japanese, Taiwanese, and perhaps New Zealander contributions to the 
Pacific and suggesting greater ``win-win'' or mutually beneficial 
Chinese involvement in the region with ``no strings attached.'' Beijing 
has even shown a willingness to block unfavorable media coverage from 
within Pacific Island states, as it did during then-Foreign Minister 
Wang's visit to the region.\21\ China also probably bribes government 
officials and entities at all levels and contributes to political 
activities that reinforce its narrative.\22\ A new area of potential 
concern, as outlined in Micronesian President David Panuelo's 
unprecedented and blistering warning letter of May 20, 2022, prior to 
the Pacific Islands Forum (PIF), the premier multilateral venue in the 
region, which held its annual summit in July 2022, pertained to China's 
goal of dominating regional communications infrastructure. He noted 
that ``the Common Development Vision seeks Chinese control and 
ownership of our communications infrastructure . . . for the purpose of 
. . . mass surveillance of those residing in, entering, and leaving our 
islands, ostensibly to occur in part through cybersecurity 
partnership.'' \23\ If his interpretation is accurate, Beijing seeks 
extensive control over Pacific Islanders' daily activities.
---------------------------------------------------------------------------
    \21\ Edwina Seselja and Joshua Boscaini, ``China's Visit to Pacific 
Highlights Growing Threat to Journalism in the Region,'' Australia 
Broadcasting Corporation News, June 1, 2022.
    \22\ Edward Cavanough, ''China and Taiwan Offered Us Huge Bribes, 
Say Solomon Islands MPs,'' The Guardian, December 7, 2019.
    \23\ ``FSM [Federated States of Micronesia] President Warns Pacific 
Leaders over China Documents,'' Radio New Zealand, May 27, 2022. 
Panuelo's original letter can be found at https://s3.documentcloud.org/
documents/22039750/letter-from-h-e-david-w-panuelo-to-pacific-island-
leaders-may-20-2022-signed.pdf.
---------------------------------------------------------------------------
China's Strategy in the Freely Associated States

    China's strategy toward the Pacific Island countries that I just 
described is also playing out in the FAS--a region of keen geostrategic 
interest to the United States.\24\ As my RAND colleagues and I 
discussed in a 2019 report to Congress, the FAS are critical enablers 
of U.S. military operations that support the United States' Indo-
Pacific strategy.\25\ Washington is seeking to sustain these long-
standing security partnerships by renewing the Compacts of Free 
Association (COFAs) it has with them. The COFAs are unique 
international agreements that allow the United States to maintain sole 
and unfettered military access to the lands, waterways, and airspace of 
the FAS. China would like to convince the FAS to do away with the COFAs 
entirely, but more realistically, it is focused on blunting any 
military advantages that the U.S. military might accrue from the COFAs. 
What follows is an accounting of some Chinese activities vis-a-vis the 
FAS to achieve this objective.
---------------------------------------------------------------------------
    \24\ Some language in this section is adapted and updated from 
Derek Grossman, Michael S. Chase, Gerard Finin, et al., America's 
Pacific Island Allies: The Freely Associated States and Chinese 
Influence, RAND Corporation, RR-2973-OSD, 2019, https://www.rand.org/
pubs/research_reports/RR2973.html.
    \25\ Grossman et al., 2019; White House, Indo-Pacific Strategy of 
the United States, February 2022.
---------------------------------------------------------------------------
Marshall Islands
    Marshall Islands is one of the four nations in Oceania that 
diplomatically recognizes Taiwan over China. What we uncovered as part 
of our 2019 research on China's strategy toward the FAS is that 
Beijing, for years, has been offering economic incentives--such as 
lowering import taxes for Marshallese-flagged shipping into Chinese 
harbors--in exchange for official ties with China.\26\ This was a 
significant incentive because, at the time of our research, the 
Marshall Islands was the third-largest ship registry. Two other 
countries at the top of these rankings, Panama and Liberia, both 
switched from Taiwan to China and received the same benefit. Thus far, 
Majuro has rebuffed Chinese offers, but a change in diplomatic 
recognition from Taipei to Beijing, if it were to ever happen, would 
very likely entail additional areas of China-Marshall Islands 
cooperation.
---------------------------------------------------------------------------
    \26\ Grossman et al., 2019, p. 40.
---------------------------------------------------------------------------
    Because it has limited influence over the Marshall Islands, Beijing 
may be attempting to find ways to covertly secure its economic 
interests there. For example, at the Asia World Expo held in Hong Kong 
in April 2018, a Chinese businessman and the mayor of Rongelap Atoll 
proposed the creation of a special administrative region to attract 
investment to the atoll. The mayor of Rongelap supported turning it 
into a ``special administrative region'' and financial center on par 
with Hong Kong, Singapore, and Dubai.\27\ The proposal quickly became a 
source of controversy in Marshallese politics, stemming from concerns 
that such a proposal could make the area a haven for money laundering 
and other illegal activities; the government declined to back it after 
it was declared unconstitutional by the Marshallese Attorney General. 
In November 2018, President Hilda Heine narrowly survived a no-
confidence vote that was ostensibly brought because of opposition to 
plans to introduce a state-backed cryptocurrency, but President Heine 
stated that the real reason for the vote was her government's 
opposition to the Chinese-backed Rongelap plan: ``Really the vote of no 
confidence is about the so-called Rongelap Atoll Special Administrative 
Region, or [RASAR] scheme, which is an effort by certain foreign 
interests to take control of one of our atolls and turn it into a 
country within our own country.'' \28\
---------------------------------------------------------------------------
    \27\ Mackenzie Smith, ``Remote Marshall Islands Atoll Plans to 
Become the `Next Hong Kong,' '' Radio New Zealand, September 21, 2018.
    \28\ Dateline Pacific, ``Marshalls President, Facing Ouster, Blames 
Chinese Influence,'' Radio New Zealand, November 9, 2018, https://
www.rnz.co.nz/international/programmes/datelinepacific/audio/
2018670409/marshalls-president-facing-ouster-blames-chinese-influence; 
Alan Boyd, ``Chinese Money Unsettles Marshallese Politics,'' Asia 
Times, November 14, 2018.
---------------------------------------------------------------------------
    More recently, two Chinese nationals, Cary Yan and Gina Zhou, who 
have also become naturalized Marshallese citizens, were arrested by 
U.S. authorities in Thailand in 2020 on corruption and money-laundering 
charges involving a New York-registered organization. Yan and Zhou were 
the drivers behind the RASAR scheme in the Marshall Islands. 
Nevertheless, in 2020, the Marshallese parliament passed legislation to 
establish RASAR, and some of these lawmakers allegedly received bribes 
of between $7,000 and $22,000. If RASAR moves forward, China would 
potentially gain access to natural resources and fishing with little 
oversight from Majuro, which is 420 miles away.\29\
---------------------------------------------------------------------------
    \29\ Pete McKenzie, ``Bribes, Booze and Bombs: The Brazen Plan to 
Create a Pacific Tax Haven,'' Washington Post, February 15, 2023.
---------------------------------------------------------------------------
    RASAR's close proximity to U.S. military facilities on Kwajalein 
Atoll raises other worrisome issues. For over five decades, Kwajalein 
Atoll has remained a strategic location for the U.S. Department of 
Defense. The U.S. Army Kwajalein Atoll hosts several critical defense-
related activities on the atoll. The largest tenant is the Ronald 
Reagan Ballistic Missile Defense Test Site, which provides the United 
States with a unique ability to test intercontinental ballistic 
missiles, ballistic missile defense, and hypersonics, as well as an 
ample spectrum of equipment required for space surveillance, space 
object identification, and monitoring new foreign launches. Kwajalein 
also hosts the U.S. Space Force's Space Fence radar system, designed to 
detect and track space debris threatening satellite operations. A 
Chinese presence at Rongelap could have security implications for 
Kwajalein, especially in terms of enhancing Beijing's ability to 
collect intelligence on sensitive U.S. sites there.
    Finally, China has further attempted to exploit the United States' 
nuclear testing legacy in the Marshall Islands, particularly within the 
sensitive context of COFA renegotiations. For example, the Chinese 
Ministry of Foreign Affairs recently argued that Washington should take 
greater responsibility for the environmental and human harm it 
committed against the Marshall Islands by testing 67 nuclear weapons 
there during the Cold War.\30\
---------------------------------------------------------------------------
    \30\ Matthew Lee and Nick Perry, ``Some Fear China Could Win from 
U.S. Spat with Marshall Islands,'' Associated Press, November 26, 2021.
---------------------------------------------------------------------------
Federated States of Micronesia
    FSM is the only state within the FAS that diplomatically recognizes 
China over Taiwan. As a result, Chinese contacts with state governments 
and state officials are numerous. In March of this year, Chinese 
Special Envoy to the Pacific Qian Bo visited and met with President 
Panuelo. In August 2017, Chinese Vice Minister of Foreign Affairs Zheng 
Zeguang visited Pohnpei with a high-level delegation and met with FSM 
political leaders. The previous president, Peter Christian, was also 
accorded a state visit to Beijing in March 2017--an honor that had a 
lasting positive effect on FSM's perception of China until Panuelo's 
tenure began in 2019. Panuelo has said ``we are bribed to be complicit, 
and bribed to be silent.'' \31\ He also described having to change his 
cell phone number because the Chinese Ambassador to FSM kept pressuring 
him to accept Chinese-made vaccines during the pandemic so that China 
appeared to have a competitive edge over the United States.\32\ At the 
time of this writing, the FSM Parliament is determining its next 
president, who might once again be more accommodative of Chinese 
wishes. We will have to continue to monitor the situation. Regardless, 
a key topic of dialogues between the two countries has been the U.S. 
Compact Trust Fund that the FSM government will rely on if U.S. 
economic assistance expires this year. Beijing has suggested that China 
might be willing to supplement the Compact Trust Fund to help the FSM 
achieve greater self-reliance.\33\
---------------------------------------------------------------------------
    \31\ ``Micronesia Takes on China,'' The Economist, March 16, 2023.
    \32\ ``Micronesia Takes on China,'' 2023.
    \33\ ``FSM Receives Visit from Highest Ranked Chinese Official in 
FSM's History,'' Kaselehlie Press, September 18, 2017.
---------------------------------------------------------------------------
    Beyond diplomacy, Beijing continues to pursue its economic 
interests in the country. In 2014, the two nations created the 
commission on economic trade cooperation. China's economic relationship 
with FSM includes substantial trade and aid components. Additionally, 
the FSM is a participant in China's BRI. Chinese embassy discretionary 
grants occasionally provide much-needed heavy equipment on an ad hoc 
basis. Larger infrastructure projects have ranged from building 
official residences for government officials at the national and state 
levels to providing ships for inter-island transport. China has also 
expressed interest in building resort hotels and casinos on Yap and 
Pohnpei.\34\
---------------------------------------------------------------------------
    \34\ Grossman et al., 2019, p. 34.
---------------------------------------------------------------------------
    On the security side, Chuuk State, the FSM's largest state, has 
long expressed interest in becoming a sovereign nation. This could 
emerge as an important consideration in the context of China's 
relationship with the FSM. Throughout the FSM's history, there has been 
domestic internal contention between the state and the national 
government over the equitable distribution of non-COFA funding 
(fisheries and tax revenue). The United States has consistently 
maintained that its relationship is with the national government in 
Palikir, and any movement by a state to secede would, if a state were 
no longer part of the federation, presumably mean an end to the COFA in 
all its dimensions. While this understanding has implicitly buttressed 
national unity, the cessation of economic support after fiscal year 
2023 or beyond may undermine national cohesion. Such a development 
could have important strategic implications by opening a pathway for 
Beijing to forge ties to an independent Chuuk.\35\ The Chuuk lagoon, 
one of the Pacific's largest and deepest, was once a critically 
important location for the Japanese Navy and remains a potentially 
important strategic naval asset.
---------------------------------------------------------------------------
    \35\ For more, see Derek Grossman, ``Delayed Chuuk Secession Vote a 
Win for U.S. Policy in Oceania,'' RAND Blog, March 6, 2020, https://
www.rand.org/blog/2020/03/delayed-chuuk-secession-vote-a-win-for-us-
policy-in.html.
---------------------------------------------------------------------------
Palau
    Like Marshall Islands, Palau also recognizes Taiwan over China, 
which has made it a target of Chinese pressure. Although it is 
difficult to determine the exact causation, Chinese tourism to Palau 
ramped up for years until, suddenly in November 2017, Beijing barred 
tourists from traveling to this pristine vacation spot. It appears that 
Beijing's move was in retaliation for Palau's refusal to switch 
diplomatic recognition.\36\ China has retaliated against other 
countries using this same tactic, including South Korea in 2017 because 
of its deployment of the U.S. Terminal High-Altitude Area Defense 
(THAAD) system. Palau's president, Surangel Whipps, Jr., said in a 
recent interview, ``There's a lot of pressure on Palau . . . what we've 
told them is that we don't have any enemies--so we shouldn't have to 
choose. If you want to have relations with Palau, you're welcome. But 
you cannot tell us that we cannot have relations with Taiwan.'' \37\
---------------------------------------------------------------------------
    \36\ Grossman et al., 2019, pp. 41-42.
    \37\ Fumi Matsumoto, ``Palau Maintains Taiwan Ties Despite Chinese 
Pressure,'' Nikkei Asia, July 13, 2022.
---------------------------------------------------------------------------
    Palau's decision to reject fellow Pacific Island nation Nauru's 
decision to initiate a process at the United Nations that might result 
in the issuance of international deep-sea mining licenses is perhaps 
another sore point in China-Palau relations.\38\ As noted, Beijing is a 
strong advocate of deep-sea mining, and China will probably look to 
partner with PIF members in favor of it--such as Cook Islands, the 
location of this year's PIF summit--against Palau.
---------------------------------------------------------------------------
    \38\ ``Palau Urges the Rest of the World to Resist Deep-Sea 
Mining,'' Island Times, April 14, 2023.
---------------------------------------------------------------------------
    And because the South China Sea is now practically devoid of 
fisheries, Chinese fishermen are going farther afield in search of 
these resources, including within Palau's EEZ. This is causing new 
security concerns. For example, in December 2020, with the assistance 
of the U.S. Coast Guard, Palauan authorities discovered 28 Chinese 
fishermen poaching sea creatures within its EEZ and deported them.\39\ 
From a broader geostrategic perspective, Beijing has expressed 
frustration at Palau's invitation to host U.S. forces in the country. 
Through its Party mouthpiece publication, Global Times, Beijing angrily 
responded ``the U.S. has continued to use all means to contain and 
encircle China in an all-round and multidimensional manner, including 
using the first and second island chains,'' of which Palau and the FAS 
are a part.\40\
---------------------------------------------------------------------------
    \39\ ``Chinese Fishing Boat Stripped and Escorted Out of Palau,'' 
Island Times, January 5, 2021.
    \40\ Li Jie, ``Palau Cannot Afford Being Geopolitical Strategic 
Pawn in US' Encirclement on China,'' Global Times, August 16, 2021.
---------------------------------------------------------------------------
China's Strategy in U.S. Territories in the Pacific

    Although they do not face diplomatic pressure from China because 
they are U.S. territories, American Samoa, CNMI, and Guam nonetheless 
are dealing with a variety of Chinese economic and security threats. I 
detail some of these threats below.

American Samoa

    Beijing's threat to American Samoa is primarily economic. Because 
the South China Sea is practically devoid of fisheries, Chinese fishing 
trawlers have increasingly turned to far-flung locales to make up the 
difference, including off the coasts of American Samoa, CNMI, and Guam. 
For American Samoa, in particular, Chinese IUU fishing activities have 
depleted tuna stocks within its EEZ and disrupted the local economy, 
even to the point of forcing a tuna cannery there, which is one of the 
island's largest employers, to temporarily suspend operations due to 
lack of tuna availability.\41\ The Biden administration has been 
considering a Trump-era plan to station a U.S. Coast Guard cutter in 
American Samoa, in part to deter and intercept Chinese IUU fishing 
activities but also to bolster the U.S. Navy presence operating in the 
East and South China Seas, which is designed to counter China's gray 
zone operations against regional opponents.\42\
---------------------------------------------------------------------------
    \41\ Dan Southerland, ``Chinese Overfishing in the South Pacific 
Devastates Some Islands' Livelihoods,'' Radio Free Asia, April 6, 2021. 
Also see Alexander B. Gray and Douglas W. Domenech, ``U.S. Territories: 
The Frontlines of Global Competition with China,'' RealClear Defense, 
March 11, 2021.

    \42\ Alexander B. Gray, ``Guarding the Pacific: How Washington Can 
Counter China in the Solomons and Beyond,'' War on the Rocks, September 
30, 2022.

---------------------------------------------------------------------------
Commonwealth of the Northern Mariana Islands

    As is the case with American Samoa, CNMI primarily faces a 
potential economic threat from China. This is mainly due to the fact 
that CNMI's economy is highly dependent on tourism coming from China. 
According to a 2021 analysis, ``Chinese influence is deeply rooted in 
the CNMI's economy at every level, from local mom-and-pop stores to 
luxurious resorts. Chinese tourists have already supplanted visitors 
from traditional markets like Japan.'' \43\ As we have seen with Palau 
and countries outside of Oceania, it is quite easy for Beijing to exact 
retaliation against those it harbors disagreements with by ending 
Chinese tourism to these destinations. Separately, although not a 
direct threat to CNMI itself necessarily, in recent years, Chinese 
scientists in conjunction with the international community have been 
making significant progress in deep-sea research, including in the 
Mariana Trench, which is the deepest place on earth. Some suspect that 
Beijing is exploring the deep seas not only to expand scientific 
knowledge but also to further its future military aims. The thinking is 
that Beijing wants to ensure that its submarines are able to break 
through the first island chain without detection, and thus, perfecting 
technology to navigate at extreme depths would be helpful in this 
regard.\44\

    \43\ Yuan Zhi (Owen) Ou, ``The Northern Mariana Islands: U.S. 
Territory, China-Dependent,'' The Diplomat, September 25, 2021.

    \44\ Meaghan Tobin, ``U.S.-China Battle for Dominance Extends 
Across Pacific, Above and Below Sea,'' South China Morning Post, 
January 19, 2019.

---------------------------------------------------------------------------
Guam

    Unlike American Samoa and CNMI, the primary Chinese threat to Guam 
is military in nature. Because Guam is home to U.S. Navy, Air Force, 
and, as of January 2023, Marine Corps bases (Camp Blaz), the island has 
become an attractive target for China to disrupt or disable in the run-
up to or during military operations against Taiwan or in the East or 
South China Sea. Indeed, Chinese social media has referred to its 
military's DF-26 intermediate-range ballistic missile as the ``Guam 
Killer.'' \45\ Thus, Pentagon planners naturally assume that Guam will 
be targeted, and in response, they have quietly deployed a THAAD 
battery there to intercept incoming missile threats.\46\ In April of 
this year, China also sent a carrier group featuring its Shandong 
aircraft carrier into waters approximately 400 miles off the coast of 
Guam.\47\ Beijing undoubtedly sought to demonstrate the capability to 
operate near Guam's shoreline to deter the United States, but it also 
probably sought to train under ``realistic conditions'' in preparation 
for potential armed conflict in the future.

    \45\ Keith Johnson, ``China's `Guam Killers' Threaten U.S. Anchor 
Base in Pacific,'' Foreign Policy, May 11, 2016.

    \46\ Wyatt Olson, ``Guam's THAAD Missile Defense Battery Will 
Relocate to New Marine Corps Base,'' Stars and Stripes, May 10, 2022.

    \47\ Joseph Trevithick, ``Chinese Carrier Recently Sailed Near 
Guam, Enters the South China Sea,'' War Zone, April 25, 2023.
---------------------------------------------------------------------------
Recommendations for Congress and the U.S. Government

    Drawing on the preceding analysis, I recommend that Congress and 
the broader U.S. government might consider the following measures:

     Ensure funding for the renewed COFAs. The COFAs are 
            essential for Washington to maintain because these unique 
            international agreements with the FAS in the North Pacific 
            enable the U.S. military to have near-exclusive access to 
            the FAS territories and EEZs. COFAs provide Washington with 
            a power projection superhighway into the Indo-Pacific to 
            address potential future contingencies, including a Taiwan, 
            East China Sea, South China Sea, or Korea scenario. 
            Congress should consider ensuring funding that is at least 
            equal to current levels, but an increased amount would 
            demonstrate a strong commitment to this geostrategically 
            vital subregion of Oceania.

     Focus on non-China-related challenges as well. The Biden 
            administration's historic U.S.-Pacific Islands Summit at 
            the White House this past September was a good start 
            because the Joint Declaration and Pacific Island Strategy 
            deprioritized countering China in favor of challenges much 
            higher on Pacific Islanders' agenda. However, more needs to 
            be done to build trust with Pacific Island states, who 
            still believe Washington is primarily interested in 
            geostrategic competition rather than helping them on issues 
            of importance in the region, such as climate change, 
            poverty alleviation, health security, and transnational 
            crime. Softer forms of cooperation are likely to be 
            welcomed throughout the region.

     Consider opening diplomatic missions in every Pacific 
            Island state. Vice President Harris' announcement to PIF 
            that the United States would open diplomatic missions in 
            Kiribati and Tonga, which just opened, and Secretary of 
            State Antony Blinken's announcement in February that 
            Washington would reopen its embassy in Solomon Islands 
            after nearly 30 years are welcome developments. However, 
            more needs to be done. The current State Department posture 
            has some Ambassadors covering multiple Pacific Island 
            countries or defense attaches doing likewise. Embassies act 
            as Washington's eyes and ears on the ground, and requesting 
            information from Australian and New Zealander 
            representatives has proven insufficient toward 
            accomplishing all of Washington's objectives. And doing so 
            overburdens Washington's friends. Instead, the United 
            States could look to build its own diplomatic capabilities 
            to ensure that China does not acquire an informational 
            advantage.

     Consider Pacific-focused policy. Bills focused on the 
            Pacific Island region, such as the Boosting Long-term U.S. 
            Engagement (BLUE) in the Pacific Act, which was introduced 
            in the past two Congresses, show a renewed emphasis on the 
            region and, particularly, on assisting Pacific Island 
            states with challenges most important to them. The BLUE 
            Pacific Act, for example, covered climate change, pandemic 
            recovery, and natural disaster preparedness, among many 
            other areas, highlighting topics that Pacific Island 
            nations cite as their most significant security 
            threats.\48\
---------------------------------------------------------------------------
    \48\ U.S. House of Representatives, ``Boosting Long-term U.S. 
Engagement (BLUE) in the Pacific Act,'' H.R. 2967, May 4, 2021, https:/
/www.congress.gov/bill/117th-congress/house-bill/2967.

     Offer economic assistance to U.S. territories particularly 
            susceptible to Chinese economic coercion. American Samoa 
            and CNMI would greatly benefit from such a program because 
            they are highly dependent on China for their livelihoods. 
            Such an effort might involve subsidizing the tuna fishing 
            or tourism industries in American Samoa and CNMI, 
---------------------------------------------------------------------------
            respectively.

     Provide additional maritime domain awareness and patrol 
            capabilities to FAS and U.S. territories. As shown in my 
            analysis, Chinese IUU fishing activities are a growing 
            problem across the entire region, and this challenge is 
            compounded by the fact that the FAS and U.S. territories 
            have large EEZs with typically limited capacity (excluding 
            Guam) to respond to Chinese incursions within them.

                                 ______
                                 

 Questions Submitted for the Record to Derek Grossman, Senior Defense 
                     Analyst, The RAND Corporation

            Questions Submitted by Representative Westerman
    Question 1. In your written statement, you refer to ``soft 
cooperation'' in the form of diplomatic presence and intergovernmental 
engagement in the region. What other forms of soft cooperation might 
would you cite or recommend?

    Answer. Soft cooperation can take many forms, so long as it is not 
military (i.e., hard cooperation). Before we discuss the various types 
of soft cooperation, it is important to briefly consider what Pacific 
Island countries seek from the United States. First and foremost is 
action on climate change as many in the region believe it is an 
existential challenge in the coming decades. To be sure, the Biden 
administration's signing of the Inflation Reduction Act (IRA) into law 
in 2022, which in part tackles climate change, was a significant step. 
However, funding and implementing the provisions within the IRA--and 
doing even more, especially on unilateral carbon emission caps--will be 
key to building trust in the Pacific Islands region. Another form of 
soft cooperation is assisting Pacific Island states to counter illegal, 
unreported, and unregulated (IUU) fishing activities and narcotics 
trafficking. One of the recent security agreements between the United 
States and Papua New Guinea addresses precisely these challenges. A 
third kind of soft cooperation falls into the broad category of 
providing humanitarian assistance and disaster relief (HA/DR) funding, 
equipment, personnel, and expertise. Although HA/DR includes a set of 
military operations, Pacific Island nations typically do not have 
military counterparts--only three have militaries (Fiji, Papua New 
Guinea, and Tonga). Hence, intergovernmental dialogues that assist 
Pacific Island countries in improving their disaster preparedness and 
cleanup operations would be welcomed, especially those that do not 
require military expertise. Finally, the United States could elevate 
the assistance it provides to strengthen government institutions and 
their ability to counter China's increasingly coercive activities 
throughout Oceania. Pacific Island countries are overwhelmingly small 
and impoverished and, thus, particularly susceptible to malign 
influence.

    Question 2. What is strategic denial, and why is it important for 
the U.S.? What does it mean for the U.S. and the ongoing with 
competition with China if we did not have strategic denial rights?

    Answer. I define strategic denial as the ability to prevent an 
adversary from achieving decisive or significant victories on the 
battlefield. A more commonly used term for strategic denial is 
``deterrence by denial.'' In the specific context of potential war 
against China over Taiwan, the Biden administration--and Trump 
administration before it--has made clear that deterrence by strategic 
denial is Washington's core objective. In other words, the United 
States will seek to provide the military equipment and expertise 
required to enhance U.S. allies and partners' ability to defend 
themselves from attack and thwart Chinese advances--or at least give 
them the ability to hold out until U.S. military intervention.
    During my oral remarks and in my written testimony, I discussed the 
need for Washington to ensure renewal of the Compacts of Free 
Association (COFAs) with the Freely Associated States in order to 
maintain uninhibited U.S. military access to the region stretching from 
Palau to Marshall Islands, which is the size of the continental United 
States. With such access, the U.S. military can leverage its position 
in the second island chain, along with nearby U.S. territories 
Commonwealth of the Northern Mariana Islands (CNMI) and Guam, to 
forward-deploy troops and equipment that can assist U.S. allies and 
partners primarily in the first island chain in the strategic denial 
mission.

            Questions Submitted by Representative Radewagen

    Question 1. You mentioned, in your written testimony, the wisdom of 
subsidizing the tuna fishing and tourism industries of American Samoa 
and the CNMI to offset and counter China's economic influence in the 
region. Can you elaborate further on these recommendations and how to 
further counter IUU fishing activities in the region?

    Answer. As I mentioned in both my oral remarks and written 
testimony, Chinese deep-sea fishing fleets are increasingly fishing in 
the exclusive economic zones (EEZs) of sovereign states throughout 
Oceania, including off the coasts of American Samoa and CNMI. Beijing's 
overfishing of these waters is creating tuna shortages, which at one 
point disrupted the operations of a major tuna cannery on American 
Samoa. I recommended that Washington subsidize the tuna cannery and 
consider speeding up deployment of U.S. Coast Guard patrol ships there 
to deter Chinese IUU fishing trawlers from entering the United States' 
EEZ. Another possible response is for the Biden administration to 
postpone or terminate its planned expansion of marine life sanctuaries 
within the EEZ. American Samoa's governor, Lemanu P.S. Mauga, voiced 
his strong opposition to the move in a recent letter to President 
Biden. Mauga argued that the planned expansion--which would actually be 
the fourth such expansion since the last under the George W. Bush 
administration in 2009 (and twice under the Obama administration in 
2014 and 2016)--``could cripple the economy of a U.S. territory.'' \1\ 
Taken to the extreme, the Biden administration could roll back Bush- 
and Obama-era expansions to reopen the approximately 50 percent of the 
EEZ that is currently closed to tuna fishing. Doing so would 
significantly raise supply in the short term, but over the longer term 
and particularly without the proper restrictions, this response might 
not solve the problem--and could even make it worse.
---------------------------------------------------------------------------
    \1\ Fili Sagapolutele, ``Gov Says Biden's Plan to Expand PRIMNM 
Would `Cripple' Our Economy,'' Samoa News, April 10, 2023.
---------------------------------------------------------------------------
    Regarding CNMI, to clarify, I did not say that Washington should 
subsidize the tourism industry. Rather, I simply observed that Chinese 
economic influence over the territory is strong due to the large volume 
of Chinese tourists who visit each year. To counter any undue level of 
Chinese economic influence in CNMI, Washington might consider 
collaborating with the territory to incentivize the growth of other 
private sector companies, especially those outside the tourism 
industry. Alternatively, Washington could limit the number of Chinese 
tourists entering CNMI annually or make the requirements for entry more 
onerous.

               Questions Submitted by Representative Case

    Question 1. During my time for questions in our hearing, I misspoke 
when describing the Government Accountability Office's reported fiscal 
impact from Compact residents on local communities. I noted that 
localities collectively reported $1.8 billion in costs between 2004 and 
2018 when in reality that figure in the GAO report is $3.2 billion. If 
Congress were to expand the same eligibility for federal benefits to 
Compact migrants as are currently extended to lawful permanent 
residents, what uncovered costs from delivering still-uncovered 
services would host communities have to cover without federal aid?

    Answer. This subject is outside my area of expertise, and so I will 
pass.

    Question 2. Citizens of the Freely Associated States are eligible 
to join the U.S. military and frequently serve in our armed forces. 
What proportion of the population from the Freely Associated States 
joins the U.S. military compared to other U.S. communities? What are 
the challenges veterans in the Freely Associated States experience in 
accessing Department of Veterans Affairs health care and other benefits 
when they return home to their countries? What can be done to improve 
this?

    Answer. This subject is outside my area of expertise, and so I will 
pass.

    Question 3. Funding for the Compacts of Free Association is 
currently borne by the Department of the Interior and the Biden 
administration suggests moving that funding the Department of State but 
to keep administration of the Compacts within the Department of the 
Interior. Given the critical role the Compacts of Free Association to 
our national security and to the Department of Defense, should the 
Department of Defense also bear some of these costs?

    Answer. I have not completed an analysis about which U.S. federal 
agencies are best suited to fund the Compacts of Free Association 
(COFAs). Regardless, I'd reiterate the importance of funding COFAs for 
maintaining U.S. strategic interests in the Pacific Islands.

    Question 4. Last year the administration released the first ever 
Strategy for Pacific Island Partnership along with a more detailed 
Roadmap to a 21st Century U.S. Pacific Islands Partnership. How was 
this and recent efforts to reengage the region seen by the Pacific 
Islands? What role can Congress play to help implement the Pacific 
Islands Partnership Strategy?

    Answer. Frankly, I think the picture here is mixed. On the one 
hand, Pacific Island countries were very pleased that the United States 
was taking the time and energy to recognize their importance and their 
particular wants and needs. On the other hand, Pacific Island leaders 
generally reject picking a side or otherwise participating in 
intensifying U.S.-China strategic competition. Following the historic 
U.S.-Pacific Islands Summit at the White House in September 2022, it 
was clear from off-the-record statements from Pacific Islanders that 
they fully understood that the event was more about Washington's 
interests in winning its competition with Beijing than in addressing 
their agenda items. Unfortunately, for the United States, it is an 
inescapable strategic context. However, additional focus on Pacific 
Island countries' top agenda items--to include first and foremost 
climate change but also (not necessarily in this order) HA/DR, 
transnational crime, institutional resilience, and internal stability--
would foster additional trust. As I noted in my written testimony, 
Congress could spur the Biden administration and future administrations 
to further action by passing legislation that promotes cooperation on 
these challenges rather than focusing on competition against China.

    Question 5. The Pacific Islands Forum, a critical inter-
governmental organization in the Pacific Islands region, laid out a 
regional vision for development of the Pacific Islands in its 2050 
Strategy for the Blue Pacific Continent. How can the United States 
support this strategy?

    Answer. As mentioned above, additional U.S. government focus on the 
challenges most pertinent to Pacific Island countries rather than on 
strategic competition with China would most effectively support the 
2050 Strategy for the Blue Pacific Continent.

                                 ______
                                 

    Ms. Hageman. Thank you.
    The Chair now recognizes Mr. Friberg for 5 minutes.

   STATEMENT OF EMIL FRIBERG, FORMER ASSISTANT DIRECTOR, GAO 
      INTERNATIONAL AFFAIRS AND TRADE, ARLINGTON, VIRGINIA

    Mr. Friberg. Good afternoon, Chair, Ranking Member, and 
members of the Subcommittee. My name is Emil Friberg. I am 
affiliated with Georgetown University. In 2021, I retired from 
the GAO, where I supported Compact of Free Association reviews, 
many of them for this Committee. The views I share today are my 
own.
    I want to highlight two things: the structure of the 
compacts and strategies to deepen COFA and U.S. ties.
    Turning to structure, the compacts are based on three 
pillars.
    The first compact pillar: defense rights and obligations. 
The benefits to the United States include strategic denial, 
defense veto, U.S. defense sites, including at Kwajalein Atoll 
in the Marshall Islands and new sites in Palau. COFA nations 
benefit from U.S. defense guarantees. COFA citizens join the 
U.S. military, a contribution to COFA defense and a benefit to 
the United States.
    The second compact pillar is economic assistance. U.S. 
grants support about one-third of Micronesia and the Marshall 
Islands' government budgets, and about 14 percent of Palau's 
budget. Many Federal agencies operate in the COFA nations when 
Congress has extended programs, essentially treating them as if 
they were a U.S. state or territory. Examples include U.S. 
postal and weather services, FAA airport programs, public 
health, Pell Grants to students, and USDA home loans to 
households and families.
    The third compact pillar is immigration. Migration benefits 
COFA families, giving them access to U.S. opportunities. 
Migration also benefits U.S. employers, some of whom recruit 
workers directly from COFA nations.
    These three compact pillars are linked together. U.S. 
defense rights are secured with economic assistance to COFA 
governments and benefits to COFA families. In conjunction with 
the U.S. state of Hawaii and the U.S. territories of Guam and 
the Commonwealth of the Northern Mariana Islands, the COFA 
nations secure the North Pacific for the United States.
    Now I will outline four strategies to deepen COFA and U.S. 
ties.
    The first strategy is: Maintain and extend U.S. programs to 
COFA nations. Congress should maintain current grants to COFA 
nations and provide eligibility for any new Federal programs as 
if they were a U.S. state or territory. For example, the CARES 
Act extended pandemic unemployment assistance eligibility to 
workers in COFA nations and COFA workers in the United States.
    A second strategy: Improve COFA migrant status to equal 
that of green card holders. Today, the status is unequal and 
sometimes confusing. Providing COFA migrants with the 
equivalent of permanent resident or green card status would 
treat COFA migrants as equal to other lawful, permanent 
residents with respect to Federal program eligibility, and 
provide a pathway for naturalization.
    The third strategy is invest in hands-on Federal engagement 
in the COFA nations. I have three examples: re-establish the 
Department of Defense Civic Action Team Program in the FSM and 
the RMI to upgrade infrastructure and to heighten our security 
presence; restore Peace Corps programs in all three compact 
nations; establish access to VA benefits and health care for 
COFA nation military veterans.
    And lastly, the fourth strategy is maintain congressional 
engagement. Congress can assure that U.S. programs deliver 
results with accountability, and that U.S. efforts are properly 
resourced. Congress can assess U.S. policy and operational 
coordination across the three compact pillars: defense, 
economic assistance, and migration.
    Finally, I would advocate that Congress reinstate the 
periodic GAO review mandate to support congressional monitoring 
of any renewed compact assistance.
    In closing, the most significant action to deepen bilateral 
ties is congressional approval of compact renewal.
    I wish to thank the Subcommittee for this opportunity to 
speak, and I look forward to any questions you may have. Thank 
you.

    [The prepared statement of Mr. Friberg follows:]
         Prepared Statement of Emil Friberg, PhD Arlington, VA

I. Introduction

    Good afternoon, Chair, Ranking Member, and distinguished members of 
the subcommittee. My name is Emil Friberg, I am affiliated with the 
Center for Australia, New Zealand, and Pacific Studies at Georgetown 
University and an economic consultant. Previously, I served as an 
Assistant Director and Senior Economist at the U.S. Government 
Accountability Office (GAO) where I oversaw reviews of the Compacts of 
Free Association, leading to 40 publications from 2000-2021. Many of 
those reviews were requested by this committee. The views expressed 
here are my own, and not of any current or past employer.\1\
---------------------------------------------------------------------------
    \1\ This testimony statement draws from my paper published by the 
East West Center's Asia-Pacific Bulletin: No Time to Lose: Renew the 
Compacts of Free Association, June 29, 2022. I also draw from U.S. GAO: 
Compacts of Free Association: Implications of Planned Ending of Some 
U.S. Economic Assistance (GAO-22-104436, Feb. 14, 2022) and Compacts of 
Free Association: Populations in U.S. Areas Have Grown, with Varying 
Reported Effects (GAO-20-491, June 15, 2020).
---------------------------------------------------------------------------
    Today I will address how the Compacts of Free Association help 
preserve U.S. interests in the Indo-Pacific and I will highlight the 
urgency for renewing the Compacts. I commend this committee for holding 
this hearing to focus on the strategic imperative of the region and 
these Compacts.
II. COFA history and structure

    As you know, Compact of Free Association (COFA) economic support, 
along with certain federal services and programs that are provided to 
the Federated States of Micronesia (FSM) and the Republic of the 
Marshall Islands (RMI) expire at the end of September 2023 and expire 
for the Republic of Palau (Palau) at the end of September 2024.
    Renewing these agreements requires the completion of bilateral 
negotiations and approval by the U.S. Congress. Negotiations started in 
2020 but made little progress. The U.S. appointment of a Special 
Presidential Envoy for Compact Negotiations in March 2022 was framed by 
concerns that China's Pacific influence would grow in the wake of 
stalled COFA negotiations. Fortunately, progress has been made and top 
line agreement was reached on future aid packages with each nation and 
is included in the President's FY2024 budget request.
History: World War II to the Compacts

    The three Compacts of Free Association are the result of a 
prolonged half-century process following WWII.
    After costly battles across the Pacific to defeat Japan, the United 
States held the islands of the North Pacific. In 1947 the United States 
became the administering authority of the Trust Territory of the 
Pacific Islands (TTPI), established by the United Nations Security 
Council.
    Under the TTPI, the United States had authority to establish bases 
and to station armed forces. During the trusteeship, the U.S. military 
used land in the region, including for 67 nuclear tests in the Marshall 
Islands conducted from 1946 to 1958.
    In accordance with its responsibilities under the UN trusteeship 
and following UN-observed plebiscites, the United States entered into 
the Compacts that created three nations and ended U.S. administration 
of the last WWII UN trusteeship.
    These Compacts entered into force in 1986 for the FSM and the RMI, 
and in 1994 for Palau.
Compact structure

Key Compact features include:

     Defense. The Compacts grant the United States ``strategic 
            denial''--the option to deny foreign militaries access to 
            the COFA nations and a ``defense veto'' to block polices 
            incompatible with U.S. authority and responsibility for 
            security and defense of the COFA nations. In addition, the 
            Compacts provide for U.S. defense sites, including sites in 
            Palau and at Kwajalein Atoll in the RMI. Importantly, the 
            RMI Compact provided compensation for damages from 67 U.S. 
            nuclear tests. The agreement was the full settlement of all 
            legal claims--past, present, and future--against the United 
            States and terminated all compensation litigation.\2\
---------------------------------------------------------------------------
    \2\ The RMI Compact (Section 177) provided $150 million as the full 
legal settlement of all claims. The COFA implementing legislation has 
authorizations for additional ex gratia compensation which have been 
used by Congress to further address the nuclear testing program legacy.
---------------------------------------------------------------------------
      COFA citizens contribute directly to the defense of the United 
            States as members of U.S. Armed Forces. They are able to 
            join the military directly from the COFA nations or enlist 
            after migrating to the United States.

     Immigration. The Compacts allow COFA citizens to work and 
            reside indefinitely in the United States. However, entry 
            under the terms of the Compact does not establish a path to 
            naturalization.

     Economic Assistance. The Compacts committed the United 
            States to provide annual economic assistance and specific 
            programs, such as the U.S. Postal Service (USPS) and 
            National Weather Service, for set periods, ending in 2023 
            for FSM and RMI, and 2024 for Palau. Compact trust funds 
            have been established to provide a source of annual 
            funding: since 1999 for Palau and after 2023 for FSM and 
            RMI. The U.S. Department of the Interior (DOI) administers 
            COFA grant assistance.

III. COFA funding and experience

Assistance

    For the COFA nations, Department of the Interior Compact funding 
will have totaled approximately $10.5 billion for the period FY1987 
through FY2023 for FSM and RMI, and FY1995 through FY2024 for Palau 
(all dollars are FY 2023 dollars).\3\
---------------------------------------------------------------------------
    \3\ Note these summary dollars do not include the significant 
assistance provided by other U.S. Departments including Education, 
Health and Human Services, and Transportation through non-Compact 
related authorizations. For example, programs such as Pell Grants and 
USDA housing loans, are provided to COFA governments and citizens as 
they are to U.S. states.

     Economic assistance to the FSM will have been $5.5 
            billion, to the RMI--$2.3 billion, and to Palau--$1.2 
---------------------------------------------------------------------------
            billion.

     On a rough per capita/per year basis, this economic 
            assistance is about: $1,400 for the FSM, $1,100 for the 
            RMI, and $2,200 for Palau.

     In addition to economic assistance, Interior Compact 
            funding also paid $738 million for military land leases and 
            $707 million for nuclear testing responses in the RMI.

    The U.S. Department of Education has provided the FSM and the RMI 
with a Supplemental Education Grant (SEG) that ends in September, 2023.
    Expiring grants (Compact and SEG) represent almost 30 percent of 
FSM national and state government expenditures and 20 percent for the 
RMI (both for FY2019). These expiring grants are mostly for education 
where they make up 86-93 percent of FSM state education expenditures 
and 50 percent of RMI education expenditures.
Trust funds

    The Palau Compact Trust Fund will likely meet its objective as a 
sinking fund to make continued payouts through 2044. The FSM and RMI 
Compact Trust Funds were designed to be perpetual funds to cover 
expiring Compact (but not SEG) grants. Under current rules, funds will 
not be disbursed in some years due to structural restrictions on 
distributions. These interruptions will cause severe fiscal shocks in 
the FSM and RMI.
Country accountability

    In 2003 in order to curtail poor accountability and performance, 
FSM and RMI Compact financial assistance changed from cash transfers to 
sector grants for priority sectors. Grant management and joint FSM-U.S. 
and RMI-U.S. committees provided oversight that improved education, 
health, and infrastructure sector performance. Financial accountability 
has improved over time, but weaknesses persist. The required Palau 
Advisory Group on Economic Reform was not constituted until August 
2022.
Federal organization and accountability

    Interior staffing shortfalls have limited the federal government's 
ability to ensure that Compact funds were used effectively. When it was 
asked by the GAO, the U.S. Congress repealed the statutory mandate for 
comprehensive GAO reviews of the FSM and RMI Compacts every five 
years.\4\ This reduced Congressional oversight of the Compacts.
---------------------------------------------------------------------------
    \4\ Public Law 111-68, Sec. 1501(c).
---------------------------------------------------------------------------
Migration

    In addition to escaping the impact of climate change and nuclear 
testing, COFA citizens have moved to the United States, seeking 
economic opportunity, education, and health care. U.S. census data 
(2013-2018) identified 94,000 Compact migrants residing in the United 
States.
    Compact legislation enacted in 2003 provided $30 million of annual 
grant assistance that is divided between Hawaii, Guam, and the 
Commonwealth of the Northern Mariana Islands to help offset the fiscal 
impact of providing government services to COFA migrants. This funding 
ends after September 2023.

IV. Key actions for the administration

Deepen bilateral relations with grants
    Annual U.S. Compact assistance is a strategic bilateral connection 
at a time of mounting security concerns. Delivering that assistance 
through an annual grant process helps maintain relations and requires 
the U.S. and COFA nations to work together. In contrast, cash transfers 
and trust fund disbursements are hands-off--a more distant 
relationship.
Embrace new and old issues
    COFA nations identify climate change as their primary security 
issue and want direct U.S. assistance for adaptation and resilience. In 
response to this request, the U.S. Department of Defense (DOD) should 
restore its Civic Actions Team (CAT) program, with a focus on upgrading 
and hardening infrastructure (airports, ports, roads, seawalls, and 
utilities) for both climate impact and to support ``agile'' 
deployments.
    The United States should also address illegal fishing that 
threatens COFA government revenue; such an action will also strengthen 
maritime security.
    Pursuing its aim as a critical moral and political issue rather 
than a legal one, the RMI wants U.S. action on outstanding nuclear 
issues, including increased compensation and nuclear waste cleanup. For 
example, U.S. action could address Runit Dome environmental issues.
Improve Compact implementation
    Actions are needed to improve grant performance and accountability 
and to address the well-understood problem of FSM and RMI trust fund 
rules and disbursements.

     Existing FSM grant distribution among FSM states must be 
            reassessed for improved education and health sector 
            performance.

     COFA nation and U.S. Compact administration require proper 
            staffing levels and capacity.

     Accountability requires transparency, including the public 
            posting of bilateral agreements, budgets, reports, meeting 
            minutes, and other documents.

     The issues of FSM and RMI trust fund rules must be 
            formally addressed, as any changes require Congressional 
            approval.

V. Key actions for Congress

Fund Compact renewal
    Timely approval of Compact renewal is essential for COFA government 
operations, and its absence will hurt government operations and 
contribute to a current surge in migration. Further, this funding 
directly links back to the concern of this hearing--countering Chinese 
influence in the Pacific.
Extend U.S. programs
    Congress can take direct actions to deepen bilateral relations, 
including (1) restoring eligibility for programs that were ``cashed 
out'' in the FSM/RMI Supplemental Education Grant (SEG) that ends in 
2023 and (2) granting COFA nations routine eligibility for other 
federal programs. For example, the recent CARES Act extended pandemic 
unemployment assistance to COFA workers. Restoration of Peace Corps 
programs in all three Compact nations would provide mutual benefits.
Establish U.S. Administrative Capacity
    Mandate adequate administration staffing for U.S. Compact 
implementation at Interior's Office of Insular Affairs and Office of 
Inspector General and the Department of State.
    Reinstate required periodic GAO reviews and conduct routine and 
consistent committee oversight.
    Currently, no federal body effectively coordinates COFA policy. 
Congress should reestablish an Interagency COFA Group, co-chaired by 
Defense, Interior, and State, and the Office of COFA Affairs under the 
authority of the National Security Council. Once established, the 
structure could coordinate government-wide responses to COFA issues, 
such as security threats, climate impact, and Compact migration.
Address COFA citizen migration
    No federal department is charged with monitoring and addressing the 
impact of migration to the United States of COFA citizen migration or 
monitoring and protecting this right on behalf COFA migrants. Congress 
has restored Compact migrant Medicaid eligibility, but other program 
eligibilities should be restored and a clear path to U.S. citizenship 
established. Further, the existing program that partially addresses 
Compact migration fiscal impact in Guam, Hawaii, and the Northern 
Mariana Islands ends this fiscal year. The current Compact impact 
approach does not address the mainland U.S. states where most COFA 
migrants now reside.
    Further the Departments of Homeland Security and Transportation 
should be charged with reporting on the entry and exit of COFA citizens 
through U.S. ports of entry in order to determine the scale of COFA 
outmigration to the United States.
VI. Conclusion

    In closing, I wish to thank the subcommittee for this opportunity 
to speak with you today. The Compacts of Free Association are integral 
to U.S. security interests and needs in the North Pacific. The 
approaching expiration of annual economic assistance requires timely 
completion of agreements and their enactment and funding by Congress. 
On its own, Congress can also take proactive steps to strengthen U.S. 
relations in the North Pacific. I look forward to any questions you may 
have.

                                 ______
                                 

 Questions Submitted for the Record to Emil Friberg, Former Assistant 
    Director and Senior Economist, Government Accountability Office

            Questions Submitted by Representative Westerman
    Question 1. The news regarding the near depletion of the Bikini 
Resettlement Trust Fund and spike in expenditures by Bikini Claims 
Trust Fund has raised serious concerns about how these funds were 
managed and how any future funds would be managed. How can the U.S. 
ensure that these COFA trust funds under Section 177 and all COFA trust 
funds are managed responsibly and used for their intended purpose?

    Answer----

Congressional actions.
    For the U.S. to ensure that COFA trust funds are managed 
responsibly and used for their intended purposes, Congress can use 
implementing legislation to direct U.S. agency actions to:

     target the use of funds for priority sectors such as 
            education and health;

     require transparency in the operation, expenditure, and 
            accountability of U.S. funds;

     condition the transfer of funds or distribution of funds 
            from a sub-account of the Compact Trust Fund on prior year 
            compliance with use and accountability requirements; for 
            example, requiring performance reporting, transparent 
            budgets, and timely and clean financial audits; and

     strengthen its own engagement through oversight hearings 
            and the reinstatement of required U.S. Government 
            Accountability Office reviews and audits.

Cause for concern--the Bikini Resettlement Trust Fund.
    Congress provided $19.2 million in 1982 (PL 97-257) to establish a 
trust fund for the resettlement of the Bikini people in the RMI, with 
an additional $1 million payment immediately available to be used per 
the terms of the trust fund agreement. The 1982 public law stated that 
payments to the people of Bikini would be according to terms and 
conditions set forth in a trust fund agreement subject only to the 
disapproval of the Secretary of the Interior.\1\ Congress provided an 
additional $90 million over FY1989-FY1992 (PL 100-447) to the 
Resettlement Trust Fund for the People of Bikini.
---------------------------------------------------------------------------
    \1\ 96 STAT. 840 PL 97-257, Sept. 10, 1982
---------------------------------------------------------------------------
    From 1982 to 2017, Interior exercised its right to veto 
expenditures from the resettlement fund. In 2017, when petioned by the 
Kili-Bikini-Ejit Local Government to end this practice, Interior 
released its veto authority on Nov. 21, 2017. Interior determined that 
the monies were no longer ``Federal funds'' and the Department deferred 
to the Mayor and Council Leaders to assume control over the 
Resettlement Trust Fund. Immediately distributions soared, and the 
FY2018 trust fund distribution was three and one-half times the average 
distribution of the previous 4 years. Today, the trust fund is 
depleted.
Transparency and accountability must be guaranteed.
    The dismal record of timely audits around the Bikini trust funds 
demonstrates the need to condition future U.S. grants and trust fund 
contributions/distributions on performance and accountability.

     Trust Fund Audits. FY2016 is the last year of released 
            audits for the Bikini Resettlement Trust Fund and the 
            Bikini Claims Trust Fund. Since then, the two trust funds 
            provide no transparency into any trust fund activities. The 
            FY2016 and prior year audits were completed between one and 
            nine months after the end of a fiscal year.

     KBE Local Government Audits. The FY2018 audit of the Kili-
            Bikini-Ejit Local Government (RMI), which was not published 
            until Feb. 4, 2023, is the most recent. It shows the 
            dramatic increase in trust fund disbursements that year, 
            after Interior transferred authority for the disbursements 
            to the mayor.

      Much like the Bikini trust funds, the local government provides 
            no transparency about its recent actions. This lack of 
            transparency is a continuation of its past performance. For 
            example, of its last 10 posted audits, the most quickly 
            completed was published more than 5 years after the fiscal 
            year ended, while the longest audit report took more than 9 
            years after the fiscal year ended to be released.

              Questions Submitted by Representative Sablan

    Question 1. The President's FY24 budget supports the adoption of 
the Compact Impact Fairness Act (CIFA) in lieu of compact impact 
payments (currently $36 million annually in mandatory and discretionary 
funding) distributed to the affected jurisdictions. In your opinion, 
would extending to COFA migrants federal benefits normally only 
available to permanent residents residing in the states and territories 
be enough to justly compensate host jurisdictions like Hawaii, Guam, 
and the Marianas?

    Answer----
CIFA will support COFA families but only partially addresses host 
        government Compact impact.
    Host jurisdictions like Hawaii, Guam, and the Commonwealth of the 
Northern Mariana Islands (CNMI) have collected and reported on the 
fiscal impact of COFA migrants for over three decades. The three areas 
have consistently reported the cost of educating the children of COFA 
migrants, as well as health system costs. Other cost reporting among 
the three has varied, with Hawaii reporting high cost for social 
services and Guam reporting high costs for public safety.
    The Compact Impact Fairness Act of 2023 (CIFA) would establish COFA 
migrant eligibility for several specific federal programs: Supplemental 
Security Income (SSI) program; Supplemental Nutrition Assistance 
Program (SNAP); Temporary Assistance for Needy Families (TANF); and 
certain social service block grants. To the extent that Hawaii, Guam, 
the CNMI, and other U.S. states are currently providing state-funded 
program benefits to COFA migrants who are ineligible for federal aid, 
CIFA would provide federal relief of ongoing state expenditures. Where 
such state-funded programs are not currently being provided, CIFA would 
directly benefit COFA migrant households.
    However, CIFA does not address the large Compact impact expense 
areas of education and public safety, nor will it cover the state/
territory share of Medicaid expenses.


    Question 2. How do you think we can best assure that congressional 
priorities provided in the second Compact will continue? If Compact 
impact payments were to resume, would we need to establish, in law, the 
formula that will be used in the future to estimate impacts on 
jurisdictions and the allocation of payments?

    Answer----
Reestablish congressional COFA priorities in new Implementing 
        legislation.
    The congressional priority to focus U.S. support on education and 
health was incorporated in the FSM/RMI amended Compacts. This 
incorporation recognized the nexus between improving the education and 
health of COFA citizens at home and reducing the impact cost of COFA 
citizens who migrate. The congressional priority for financial 
accountability was incorporated through the use of grants rather than 
transfers to COFA nations and the establishment of joint oversight 
committees.

    To ensure that COFA funds are managed responsibly and used for 
their intended purposes, implementing legislation can direct U.S. 
agency actions and condition the distribution of funds for only 
specified uses and only after meeting accountability requirements. For 
example, legislation can:

     specify agency actions, providing clear objectives and 
            instructions to the Secretaries of the Interior and State;

     require transparency in the operation, expenditure, and 
            accountability of U.S. funds, whether provided directly or 
            as distributions from U.S.-funded Compact Trust Funds;

     condition the transfer (or distribution) of funds on prior 
            year compliance with use and accountability requirements; 
            for example, requiring performance reporting, transparent 
            budgets, and timely and clean financial audits; and

     strengthen its own engagement through oversight hearings 
            and by reinstating required U.S. Government Accountability 
            Office reviews and audits.

Distribution of Compact impact grants to date.
    During the amended Compact period, Congress provided $30 million in 
annual Department of the Interior grant funds to be distributed between 
American Samoa, Guam, Hawaii, and the CNMI in proportion to a periodic 
count of the COFA migrant population in the four jurisdictions.
    Interior contracted with the U.S. Census Bureau to conduct periodic 
population counts. In the most recent effort, Census counted FAS 
citizens who entered the United States after 1986 (from Micronesia and 
the Marshall Islands) or 1994 (from Palau) and also included their 
U.S.-born children (biological, adopted, and step-) and grandchildren 
younger than 18 years in the count of COFA migrants.
Distribution of Compact impact grants going forward.
    Renewing Compact Impact grants going forward requires legislative 
action. While the current structure could be extended as currently 
written, this is an opportunity to modify the approach, including:

     Modify how the COFA population is defined for a per-capita 
            distribution of grant funds. For example, should the U.S.-
            born children, and even grandchildren, of COFA migrants be 
            counted?

     Modify the geographic scope of Compact Impact grant funds 
            beyond the Pacific areas to states with significant COFA 
            populations.

     Modify the allowed use of Compact Impact grants to focus 
            on specific sectors or programming areas, such as education 
            and public safety.

     Enforce or modify a requirement that Interior reports to 
            Congress annually on Compact impact. Interior last reported 
            on Sept. 8, 2017.

     If COFA-affected jurisdictions are required to report on 
            Compact impact, require Interior to issue reporting and 
            methodology guidance.\2\
---------------------------------------------------------------------------
    \2\ See unimplemented U.S. GAO recommendations in Compacts of Free 
Association: Improvements Needed to Assess and Address Growing 
Migration (GAO-12-64, November 14, 2011), https://www.gao.gov/products/
GAO-12-64.

    Question 3. The accounting and identification of COFA migrants 
needs to be tightened it seems and more narrowly defined. For instance, 
I understand that U.S. citizen children and grandchildren of COFA 
migrants who are working, paying taxes, and contributing to a state's 
or territory's economy could still be counted by Census and Interior as 
COFA migrants. Do you think this is appropriate and that such 
individuals should still be counted as negatively impacting a state or 
territory's finances and therefore requiring reimbursement? How would 
---------------------------------------------------------------------------
you recommend COFA migrants be defined and counted?

    Answer. Recent Interior/Census enumeration efforts counted U.S.-
born children/grandchildren of COFA migrants under age 18. Once they 
turn 18, they are no longer counted as COFA migrants in the population 
count for division of Compact impact grants. One rational for counting 
these US-citizen children is recognizing the cost of migrant households 
on the education system.
    However, the counting of U.S. born children under age 18 in these 
households has been complicated for Census, and has resulted in data 
programming errors, that in turn resulted in enumeration errors, that 
in turn led to errors in Compact impact payments.\3\
---------------------------------------------------------------------------
    \3\ See: Compacts of Free Association: Populations in U.S. Areas 
Have Grown, with Varying Reported Effects (GAO-20-491, June 15, 2020), 
htps://www.gao.gov/products/GAO-20-491, Appendix VI: Compact Migrant 
Enumeration Methods, Definitions, and Error.

    Going forward, I recommend a simpler definition and method to count 
COFA migrants in the event that future Compact impact grants are 
---------------------------------------------------------------------------
distributed to states and territories based on COFA population:

     Count people present in the United States who were born in 
            the FAS and are not US citizens. (Since they are not U.S. 
            citizens, they will travel on a COFA passport and enter the 
            U.S. under the terms of the Compacts.)

     For the 50 U.S. states, Census can present data from the 
            American Community Survey (ACS) on this population. Since 
            the ACS is a continuous survey effort, the estimated COFA 
            population can be updated over time.

     For the Pacific U.S. territories (where the ACS is not 
            implemented), the decennial census can be used by Census to 
            establish a baseline COFA population. That number can be 
            annually updated between each census using Department of 
            Homeland Security, Customs and Border Protection passport 
            scan data for arrivals and departures. (Inward annual 
            migration to a U.S. territory would be the difference 
            between COFA arrivals and COFA departures that year.) This 
            cooperation between Census, DHS, and Interior may require a 
            congressional mandate.

    Question 4. Can you discuss the viability of the trust funds and 
the payment of those funds through continued sector grants for 
healthcare and education?

    Answer----
FSM and RMI Compact Trust Funds.
    By design, FSM and RMI Compact Trust Fund distributions cannot 
exceed the level of expiring Compact sector grants. They are not 
designed to cover the expiring Supplemental Education Grant (SEG) or 
the cost of any of the expiring Federal services (Postal Service, 
Weather Service, FEMA funds).
    Consequently, there is a looming hit to the FSM and RMI education 
sectors with the loss of the Supplemental Education Grant, with its 
final federal appropriation in FY2023. For example, Chuuk State in the 
FSM will lose 22 percent of its education budget (FY2019 data) due to 
the SEG's expiration.\4\
---------------------------------------------------------------------------
    \4\ Chuuk State is selected for the example as it is the most 
dependent on U.S. funds among the FSM states and more dependent than 
RMI and Palau on U.S. funds.
---------------------------------------------------------------------------
    Future education and health budgets are also at risk. Both trust 
funds can initially cover expiring grants, but under current trust fund 
rules there will be zero disbursements in future years when there is a 
downturn in stock market returns. The resultant fiscal crisis would be 
severe: in Chuuk State, the Compact grants covered by trust fund 
support represent 71 percent of education and 86 percent of health 
expenditures (FY2019 data).
    Current Compact negotiations and signed agreements may alter the 
future prospects of the trust funds, either through additional 
deposits, by making necessary changes in trust fund distribution rules, 
or even by re-purposing the use of trust fund distributions.
Palau Compact Trust Fund.
    The Palau Compact Trust Fund was designed as a sinking fund to make 
payments until 2045. It is very likely to achieve this goal and could 
continue to make payments in subsequent years.

               Questions Submitted by Representative Case

    Question 1. During my time for questions in our hearing, I misspoke 
when describing the Government Accountability Office's reported fiscal 
impact from Compact residents on local communities. I noted that 
localities collectively reported $1.8 billion in costs between 2004 and 
2018 when in reality that figure in the GAO report is $3.2 billion. If 
Congress were to expand the same eligibility for federal benefits to 
Compact migrants as are currently extended to lawful permanent 
residents, what uncovered costs from delivering still-uncovered 
services would host communities have to cover without federal aid?
    Answer----
Updated Compact Impact Costs for FY2004 to FY2018
    At the time U.S. GAO reported on the Compact Impact for Guam, 
Hawaii, and CNMI, the available data summed to $3.2 billion for FY2004-
FY2018. However, at the time of the GAO report, Guam had tabulated 
Compact Impact cost for FY2018. With that data now available from Guam, 
the TOTAL Compact Impact reported is $3.3. billion ($1.85 billion for 
Hawaii, $1.37 billion for Guam, and $116 million for CNMI). For FY2018 
alone, Hawaii reported $198 million in Compact Impact, Guam reported 
$150 million, and the CNMI reported $10 million.
CIFA will support COFA families but only partially address host 
        government Compact impact.
    Host jurisdictions like Hawaii, Guam, and the Commonwealth of the 
Northern Mariana Islands (CNMI) have collected and reported on the 
fiscal impact of COFA migrants for over three decades. The three areas 
have consistently reported the cost of educating the children of COFA 
migrants, as well as health system costs. Other cost reporting among 
the three has varied, with Hawaii reporting high costs for social 
services and Guam reporting high costs for public safety.
    The Compact Impact Fairness Act of 2023 (CIFA) would establish COFA 
migrant eligibility for several specific federal programs: Supplemental 
Security Income (SSI) program; Supplemental Nutrition Assistance 
Program (SNAP); Temporary Assistance for Needy Families (TANF); and 
certain social service block grants. To the extent that Hawaii, Guam, 
the CNMI, and other U.S. states are currently providing state-funded 
program benefits to COFA migrants who are ineligible for federal aid, 
CIFA would provide federal relief of ongoing state expenditures. Where 
such state-funded programs are not currently being provided, CIFA would 
directly benefit COFA migrant households.
    However, CIFA does not address the large Compact impact expense 
areas of education and public safety, nor will it cover the state/
territory share of Medicaid expenses. The cost of education is the 
primary area of reported Compact impact for Hawaii and Guam, 
representing $118 million or 64 percent of Hawaii Compact impact in 
FY2017, and $73 million or 49 percent of Guam Compact impact in FY2017.
    The 2020 public law that restored Medicaid eligibility for COFA 
migrants is beneficial to the U.S. states who had used state funds for 
COFA medical coverage. However, with Medicaid extended, the states 
remain responsible for the state share of Medicaid expenses. Currently 
the state share is 44 percent for the State of Hawaii.\5\ For the U.S. 
territories the benefit of Medicaid COFA eligibility is not certain as 
the federal program operates with a financial cap on federal 
expenditures in the territories.
---------------------------------------------------------------------------
    \5\ This accounts for the Federal Medical Assistance Percentage 
(FMAP) FY2023 rate of 56 percent in Hawaii. The federal share of CHIP 
is 69 percent in Hawaii.

    Question 2. Citizens of the Freely Associated States are eligible 
to join the U.S. military and frequently serve in our armed forces. 
What proportion of the population from the Freely Associated States 
joins the U.S. military compared to other U.S. communities? What are 
the challenges veterans in the Freely Associated States experience in 
accessing Department of Veterans Affairs health care and other benefits 
when they return home to their countries? What can be done to improve 
---------------------------------------------------------------------------
this?

    Answer. Data on COFA citizens in the U.S. military is seldom 
presented in DOD reports or other demographic reporting, possibly due 
to the small numbers. I am not aware of any current data analysis of 
this topic. There are two sources that could be used by researchers to 
answer this question:

     U.S. Census data: For the 50 U.S. states, the American 
            Community Survey (ACS) can be used to answer the question 
            about the proportion of COFA citizens in the U.S. military 
            as compared to other U.S. communities. For example, there 
            are questions in the survey that identify place of birth 
            (COFA nations) and current as well as past service in the 
            U.S. Armed Forces, Reserves, or National Guard. To make a 
            comparison between COFA and other U.S. communities, the 
            populations should be of the same age range (for example 
            age 18-30), high school graduates or higher, and fluent in 
            English. The later two criteria are generally requirements 
            to join the U.S. military. For the U.S. territories, the 
            decennial census data is the only source for this 
            information. Note, this data source can also be used to 
            identify the number of prior military service members for 
            providing veteran services. Due to the small numbers of 
            COFA citizens in the ACS data and the requirement for 
            confidentiality, Census may have to undertake this 
            analysis.

     DOD: Defense Department manpower data also contains 
            information that could be used to understand the 
            contributions of COFA citizens to the U.S. military. For 
            example, the Population Representation in the Military 
            Services report (last published for FY2019) by the DOD 
            Office of Military Personnel Policy compares the 
            demographics of the armed forces and the applicants and 
            accessions each year to civilian demographic benchmarks. 
            The report uses data from the Defense Manpower Data Center 
            (DOD) and the Current Population Survey (Bureau of Labor 
            Statistics). Variables analyzed include age, gender, race/
            ethnicity, geography, and neighborhood income.

    COFA nation veterans are not able to receive Veterans 
Administration (VA) benefits in their home nations. If they reside in 
their home nation, they need to buy an airplane ticket and fly to Guam 
or Hawaii to access health care. Previously introduced congressional 
legislation called for the VA to operate a pilot program to facilitate 
COFA veterans' access to health care in the Pacific. The importance of 
access to VA benefits is one reason that some COFA migrants stay in the 
United States. To improve on the status quo, having the VA implement a 
pilot program to address the access gap would be beneficial to COFA 
veterans and would, of course, honor the service of those veterans.

    Question 3. Funding for the Compacts of Free Association is 
currently borne by the Department of the Interior and the Biden 
administration suggests moving that funding the Department of State but 
to keep administration of the Compacts within the Department of the 
Interior. Given the critical role the Compacts of Free Association to 
our national security and to the Department of Defense, should the 
Department of Defense also bear some of these costs?

    Answer. This is an appropriate issue to raise. The Compacts are 
based on three pillars: defense rights, economic assistance, and 
immigration. U.S. defense rights are secured with economic assistance 
to COFA nations and families. The history to date has little DOD 
contribution to the three Compact pillars; rather, Interior directly 
pays for DOD operational interests in the COFA nations for the benefit 
of the Department of the Defense:

     From FY1987 to FY2023, Interior has provided the Marshall 
            Islands with $352 million (current dollars) or $707 million 
            (FY2023 dollars) for nuclear testing compensation and 
            programs.

     Further, Interior has provided the Marshall Islands with 
            $526 million (current dollars) or $738 million (FY2023 
            dollars) for military land lease payments.

    Given the heightened strategic interest of the region, this is the 
right time for DOD to bring its substantial financial resources into 
the Compact relationship framework. Beyond finances, DOD can also make 
in-kind contributions: (1) re-establish its Civic Action Team program 
in the FSM and RMI, (2) continue its deployment of humanitarian 
missions, and (3) address illegal fishing that threatens COFA 
government revenue and maritime security.

    Question 4. Last year the administration released the first ever 
Strategy for Pacific Island Partnership along with a more detailed 
Roadmap to a 21st Century U.S. Pacific Islands Partnership. How was 
this and recent efforts to reengage the region seen by the Pacific 
Islands? What role can Congress play to help implement the Pacific 
Islands Partnership Strategy?

    Answer. Congress can use its appropriations and oversight role to 
monitor U.S. engagement and implementation of the Strategy/Roadmap. The 
Roadmap provides an extensive list of project areas and numerous 
financial commitments. Congress can review U.S. agency operations to 
make sure they are coordinated and properly resourced. One area for 
review is that the United States coordinates with other country and 
international agency donors to the Pacific islands to avoid duplication 
and to allow an efficient division of labor. Regarding resources, are 
U.S. projects focused and scaled to be well resourced? Or are U.S. 
projects diffused and underfunded? U.S. efforts should be focused in 
order to succeed.
    The recent establishment of U.S. Embassies across the Pacific and 
the promised deployment of Peace Corps is an essential demonstration of 
a new U.S. reengagement with the Pacific islands.

    I believe other panel members will have more to contribute on these 
questions.

    Question 5. The Pacific Islands Forum, a critical inter-
governmental organization in the Pacific Islands region, laid out a 
regional vision for development of the Pacific Islands in its 2050 
Strategy for the Blue Pacific Continent. How can the United States 
support this strategy?

    Answer. I believe other panel members will have more to contribute 
on this question.

                                 ______
                                 

    Ms. Hageman. I thank the witness for their testimony, and 
the Chair now recognizes Ms. Paskal for 5 minutes.

     STATEMENT OF CLEO PASKAL, NON-RESIDENT SENIOR FELLOW, 
     FOUNDATION FOR DEFENSE OF DEMOCRACIES, WASHINGTON, DC

    Ms. Paskal. Chair Hageman, Ranking Member Leger Fernandez, 
distinguished members of the Subcommittee, thank you for the 
daunting honor of being invited to testify today.
    I am going to explain why the FAS are important to China, 
what Beijing is doing to try to turn them into vassal states, 
and how the United States can help the FAS defend themselves.
    Why are the FAS important to China? Well, because they are 
really important to the United States. The U.S. relationship 
with the FAS, as we have heard, is multi-dimensional and 
complex. China has some interests in many of the dimensions, 
but there is one above all that makes them a very high priority 
for Beijing, and that is geography.
    We often hear about the strategic importance of the first 
island chain. That is the chain of islands that runs roughly 
north-south off the coast of Asia: Japan, Taiwan, Philippines, 
Malaysia. It hems in China's vast and growing military. Much of 
America's defense strategy in the Pacific is reinforcing that 
so-called castle wall.
    The implicit assumption is the PLA will come pouring off 
the coast of China and hit the chain. That is the strategy. 
But, as the saying goes, amateurs talk strategy and 
professionals talk logistics. And the logistical reality is 
that this really gets a lot harder, if not impossible, without 
the east-west chain of islands.
    America's Pacific Islands and the FAS create a corridor of 
freedom, that includes freedom of deployment, from Hawaii to 
the waters of treaty allies Philippines and Japan, and through 
them onto Taiwan. Continued access is the unspoken assumption 
that underpins the castle wall approach.
    Through their COFAs with the United States, the FAS have 
voluntarily granted the United States, as we have heard, 
uniquely extensive defense and security access to their 
sovereign territories. The United States takes these 
extraordinary agreements for granted. It shouldn't. As I have 
heard Dr. Watson say, the word ``free'' isn't freely 
associated.
    China can read a map as well, and has been working hard and 
smart to change the strategic geography. It has been expanding 
its reach by building and militarizing islands between its 
coast and the first island chain in the South China Sea. That 
pushes it closer to that first island chain and aids in its 
deployment. It is also one of the reasons why Beijing is so 
keen on taking Taiwan. It blows a hole in the chain.
    But taking Taiwan isn't China's end point. Once it takes 
Taiwan, China needs to secure it. That means the security 
perimeter is centered on Taiwan, and then goes out from there, 
which the other Pacific Islands' leaders and the FAS know it. 
In 2022, Micronesian President David Panuelo wrote that China's 
intention was ``shifting us very close into Beijing's orbit, 
intrinsically tying the whole of our economies and societies to 
them.''
    The people of the region also know it. When, as was 
mentioned, China media talks about a Guam killer missile, the 
people of Guam, Americans, know that means killing them. 
Imagine if Chinese media was talking about Wyoming killer 
missiles, for example.
    China would prefer to take Taiwan through political warfare 
than by force. Also, China would prefer to take the FAS the 
same way.
    So, how is China trying to use political warfare to 
undermine the United States and the FAS? It is attacking the 
institutions of state and democracy itself in a form of 
entropic warfare, as the Chair mentioned. That creates social 
and political fragmentation and weakens resistance. Here are 
some examples from each of the FAS.
    Dr. Grossman mentioned Rongelap and the Chinese Marshallese 
couple that tried to essentially create, according to the U.S. 
Government indictment, the intention of establishing a semi-
autonomous region akin to Hong Kong within the country. That 
has now gone to trial. That attempt came within one vote of 
succeeding in the Marshall Islands Parliament. The couple 
involved pled guilty, and a few weeks ago the United States 
deported one of the criminals back to the Marshall Islands, 
where she is free to establish her linkages with local elites, 
some of whom will be running in the upcoming election. The 
second sentencing was today, and he is also likely to be 
deported back to the Marshall Islands.
    There are similar concerns about Chinese money and criminal 
activity affecting the upcoming elections in Palau, another 
country that recognizes Taiwan. Palau has deported hundreds of 
Chinese criminals, and has since identified many more that it 
doesn't have the capacity to expel. U.S.-sanctioned major triad 
figure Broken Tooth was also operating from Palau.
    In Micronesia, the former President wrote about China, ``We 
are bribed to be complicit and bribed to be silent. The 
practical impact of this is that some senior members and 
elected officials take actions that are contrary to FSM's 
national interests, but are consistent with the PRC's national 
interests.''
    Each of the FAS is one election away from being lost to the 
free world. From a narrow strategic lens, that means that, in 
the same way the loss of Taiwan blows a hole in the north-south 
chain, this blows a hole in the east-west chain.
    With the United States looking at the edge of the Pacific 
and focusing on the Chinese coast, China is looking at 
replicating an American World War II island-hopping campaign by 
using political warfare to embed and conquer.
    The goal? In 2008, Admiral Keating told SASC that a senior 
Chinese officer suggested to him, ``Why don't we reach an 
agreement, you and I? You take Hawaii east, we will take Hawaii 
west, we will share information, and we will save you all the 
trouble of deploying your forces west of Hawaii.'' China's 
actions make it look like that wasn't said in jest.
    This has the potential to change the security dynamic of 
the Pacific in the most fundamental way we have seen since the 
end of World War II. The honest leaders of the region know it, 
and are trying to tell us for the sake of their people and for 
the sake of America. We owe it to them and to those who died 
the last time around to listen. In my written testimony, I make 
several recommendations about how to do that.
    Thank you.

    [The prepared statement of Ms. Paskal follows:]
    Prepared Statement of Cleo Paskal, Non-Resident Senior Fellow, 
                 Foundation for Defense of Democracies
Introduction

    Chairman Hageman, Ranking Member Leger Fernandez, and distinguished 
members of this subcommittee, thank you for the privilege and honor of 
being invited to testify today on this important topic.
    The Republic of the Marshall Islands (RMI), the Federated States of 
Micronesia (FSM), and the Republic of Palau are, by far, the United 
States' most supportive strategic allies.
    Through their Compacts of Free Association (COFAs) with the United 
States, the three Freely Associated States (FAS) have voluntarily 
granted the United States uniquely extensive defense and security 
access in their sovereign territories. In the words of the Compacts: 
``The Government of the United States has full authority and 
responsibility for security and defense matters in or relating to the 
Marshall Islands and the Federated States of Micronesia [and Palau].'' 
\1\
---------------------------------------------------------------------------
    \1\ Compact of Free Association Act of 1985. Pub. L. 99-239 (99th 
Congress), 99 Stat. 1770, codified as amended at 48 USC Sec. 1681. 
(https://www.congress.gov/99/statute/STATUTE-99/STATUTE-99-Pg1770.pdf); 
Trust Territory of the Pacific Islands. Pub. L. 99-658 (99th Congress), 
100 Stat. 3672, codified as amended at 48 USC Sec. 1681. (https://
www.congress.gov/99/statute/STATUTE-100/STATUTE-100-Pg3672.pdf)
---------------------------------------------------------------------------
    This includes control over key aspects of strategic decision-
making, such as the prerogative for the United States to set up and 
operate U.S. military bases in the countries \2\ and to have a veto 
over other countries' military access to the region.\3\
---------------------------------------------------------------------------
    \2\ Thomas Lum, ``The Compacts of Free Association,'' Congressional 
Research Service, August 15, 2022. (https://crsreports.congress.gov/
product/pdf/IF/IF12194/1)
    \3\ In broad terms, apart from defense and security provisions, the 
COFAs also give citizens of the FAS the right to work in the U.S., to 
serve in the U.S. military, and they provide financial support and 
services (such as the postal service) to the government and people of 
the FAS. The financial and service provisions are renegotiated every 
twenty years, and are currently up for renewal, expiring in FSM/RMI in 
2023 and Palau in 2024.
---------------------------------------------------------------------------
    The COFAs have strong bipartisan support, including important 
leadership from members of this subcommittee.\4\ In other examples, in 
a 2019 hearing, Representative Brad Sherman (D-CA) said, ``[T]he 
Compacts create bonds between the United States and these three 
countries that are closer than we enjoy with any other sovereign 
nation.'' \5\ That same year, Republican Mike Pompeo became the first 
Secretary of State to visit FSM in a bid to renew COFA negotiations.\6\
---------------------------------------------------------------------------
    \4\ Jack Detsch and Zinya Salfiti, ``Congress Presses White House 
to Take Control of Pacific Island Talks,'' Foreign Policy, September 8, 
2021. (https://foreignpolicy.com/2021/09/08/congress-presses-white-
house-to-take-control-of-pacific-island-talks)
    \5\ U.S. House of Representatives, Committee on Foreign Affairs and 
Committee on Natural Resources, ``Joint Hearing on Sustaining U.S. 
Pacific Insular Relationships,'' September 26, 2019. (https://
www.govinfo.gov/content/pkg/CHRG-116hhrg37848/pdf/CHRG-
116hhrg37848.pdf)
    \6\ Colin Packham and Jonathan Barrett, ``U.S. seeks to renew 
Pacific islands security pact to foil China,'' Reuters, August 5, 2019. 
(https://www.reuters.com/article/us-micronesia-usa-pompeo-
idUSKCN1UV0UV)
---------------------------------------------------------------------------
    Given the locations of the FAS, the Compacts have come to form the 
often-unacknowledged foundation of the United States' defense 
architecture in the Pacific. With their thousand-plus scattered islands 
and atolls, the Exclusive Economic Zones (EEZs) of the three countries 
combine to cover a contiguous maritime area larger than the continental 
United States, right through the heart of the Central Pacific.
Historical Context

    The region's strategic importance to the United States has long 
been evident and became undeniable in the 20th Century.
    After World War I, the League of Nations handed many of Germany's 
Pacific possessions, including much of what is now the FAS and the 
Commonwealth of Northern Marianas, to Imperial Japan under what is 
known as the South Seas Mandate. For the decades leading up to World 
War II, Japan administered this vast area as a colony with the main 
administrative seat in what is now Koror, Palau. The Palauan language 
still has many Japanese loan words, and thanks to intermarriage, 
Japanese surnames are common across the region.
    In the 1930s, Japan put great effort into establishing ports and 
airfields with, at least, dual-use capabilities. It also put in 
extensive defensive fortifications and communications systems and 
streamlined resource extraction.
    By the time Japan attacked Pearl Harbor on December 7, 1941, with 
the intention of pushing the United States out of the Pacific, it was 
already prepared and dug in across what is now the FAS and the 
Commonwealth of Northern Marianas. It invaded Guam on December 8, 
defeating the U.S. garrison by December 10.
    Liberating the region from Imperial Japan resulted in some of the 
most horrific fighting of the war. Countless locals suffered and died, 
islands were devastated, and the heart-rending U.S. military losses of 
thousands in battles like Peleliu (Palau), Angaur (Palau), Truk (now 
Chuuk, FSM), Kwajalein (RMI), and Guam shaped generations of Americans.
    After the war, again acknowledging the region's uniquely important 
location on the front line between Asia and the Americas, the area now 
covered by the FAS was included in the only United Nations `Strategic' 
Trust Territory \7\ and was put under U.S. administration. While under 
U.S. administration, the U.S. conducted 67 nuclear tests in the 
Marshall Islands. If the explosive power were spread out evenly, it 
would equal approximately one Hiroshima explosion a day for twenty 
years.\8\
---------------------------------------------------------------------------
    \7\ ``UN Trusteeship Council Documentation,'' Dag Hammarskjold 
Library, April 24, 2023. (https://research.un.org/en/docs/tc/
pacificislands)
    \8\ Hart Rapaport and Ivana Nikolic Hughes, ``The U.S. Must Take 
Responsibility for Nuclear Fallout in the Marshall Islands,'' 
Scientific American, April 4, 2022. (https://
www.scientificamerican.com/article/the-u-s-must-take-responsibility-
for-nuclear-fallout-in-the-marshall-islands)
---------------------------------------------------------------------------
    In spite of this, as they went independent, the people of the 
region chose to enter into Compacts with the United States. In 1986, 
the United States reached separate COFA agreements with the Marshall 
Islands and with the Micronesian island groups of Yap, Chuuk, Kosrae, 
and Pohnpei to form, respectively, The Republic of Marshall Islands and 
the Federated States of Micronesia.\9\ Palau agreed to a Compact in 
1994.\10\
---------------------------------------------------------------------------
    \9\ ``Compacts of Free Association,'' Office of Insular Affairs, 
U.S. Department of the Interior, (https://www.doi.gov/oia/compacts-of-
free-association)
    \10\ William Chapman, ``In Palau, Even God is Said to Oppose 
Micronesian Unity,'' The Washington Post, July 17, 1978. (https://
www.washingtonpost.com/archive/politics/1978/07/17/in-palau-even-god-
is-said-to-oppose-micronesian-unity/f85347c8-d7cc-4680-bfe4-
7371975bd349)
---------------------------------------------------------------------------
    The Commonwealth of the Northern Mariana Islands (CNMI) considered 
but rejected independence and formally joined with the United States as 
a commonwealth in 1986. It had been proposed that the Northern Mariana 
Islands join with Guam, and while there was a considerable degree of 
public support in the Marianas, this did not happen because Guam 
ultimately rejected the idea.
    The memory of the sacrifices of World War II and concern over 
Soviet activities in the Pacific motivated many American political 
leaders to work to ensure the continuation of deep and strong relations 
with American Pacific islands and to establish the Compacts.
    Ambassador Amatlain Elizabeth Kabua, the permanent representative 
of the Marshall Islands to the United Nations, noted that at the time 
that her country's COFA was originally concluded with the United 
States: ``Many in the U.S. Congress and government had fought in the 
Pacific during World War Two--they knew who we were, where we were, and 
why we were important.'' \11\
---------------------------------------------------------------------------
    \11\ Carnegie Endowment, ``Islands in Geopolitics,'' YouTube, 
September 19, 2021. (https://www.youtube.com/watch?v=ZbegDXWLHXA)
---------------------------------------------------------------------------
    There was an acknowledgement that America's Pacific islands paid 
deeply for being country's real Pacific `coast.' For example, when then 
President Ronald Reagan, who was instrumental in passing the Compacts, 
landed in Guam in 1984, he said: ``[Guam] may be nearly 9,000 miles 
from our Nation's Capital, but it's a real pleasure to know that we're 
among fellow Americans. . . . In times of crisis, few Americans have 
been more steadfast in the defense of our shared values and few have 
made more sacrifices to preserve them.'' \12\ It is worth remembering 
that Chinese media calls China's DF-26 missile the ``Guam killer.'' 
\13\
---------------------------------------------------------------------------
    \12\ President Ronald Reagan, ``Remarks on Arrival at Guam 
International Airport in Agana,'' April 25, 1984. (https://
www.reaganlibrary.gov/archives/speech/remarks-arrival-guam-
international-airport-agana)
    \13\ Bill Gertz, ``Army Deploying Iron Dome Missile Defense to 
Guam,'' The Washington Times, October 7, 2021. (https://
www.washingtontimes.com/news/2021/oct/7/army-deploying-iron-dome-
missile-defense-guam)
---------------------------------------------------------------------------
Forgetting the Map

    However, especially after the end of the Cold War, some in the U.S. 
defense and strategic community seem to have gradually forgotten why 
the FAS are important. There is, as former Reserve Head of Intelligence 
for Marine Forces in the Pacific, Col. Grant Newsham puts it: ``a focus 
on the castle wall--on building up and working with Japan, Philippines, 
Australia, and others--assuming the People's Liberation Army [PLA] will 
conveniently come pouring off the coast of China and into our 
crosshairs. Meanwhile, China is setting up well behind our western-most 
defenses, in the Pacific islands.''
China Learns From the Defeat of Others

    The American Pacific islands and the FAS create a `corridor of 
freedom' (including freedom of deployment) from America's Pacific 
islands of Hawaii to the waters of treaty allies Philippines and Japan. 
And, through them, on to Taiwan. Continued access is the unspoken 
assumption that underpins the `castle wall' approach.
    So, what are China's goals in the region? In 2008, Admiral Timothy 
Keating told the Senate Armed Services Committee that a senior Chinese 
officer suggested to him: ``why don't we reach an agreement, you and I? 
You take Hawaii east. We'll take Hawaii west. We'll share information, 
and we'll save you all the trouble of deploying your naval forces west 
of Hawaii.' '' \14\
---------------------------------------------------------------------------
    \14\ Cleo Paskal, ``China Moves to Dominate Pacific with U.S. Mired 
in Ukraine,'' The Sunday Guardian (India), March 13, 2022. (https://
www.sundayguardianlive.com/news/china-moves-dominate-pacific-u-s-mired-
ukraine)
---------------------------------------------------------------------------
    Getting effective control of the Pacific islands is an essential 
part of that goal. And there is evidence that China has been making a 
concerned attempt to jump the castle wall and, as the Japanese did in 
the 1930s, hunker down across the Pacific islands. But, having learned 
from the Japanese experience, they are using political warfare and so 
keeping under the threshold of what would call for a military response.
    China's efforts are well-funded and broadly successful. They 
generally follow a predictable sequence. First, the People's Republic 
of China (PRC) puts in a commercial presence with Chinese nationals 
(who, according to China's 2017 National Intelligence Law, are legally 
obligated to support the government's intelligence operations).\15\ 
Where possible, there is a targeting of key industries, such as 
fishing, lumber, and mining. There are also highly publicized 
infrastructure projects and ``gifts.'' This economic engagement usually 
includes two other elements: a focus on projects that give China a 
strategic edge, for example, ports, airports and telecoms; and 
corruption (including working with Chinese organized crime).\16\
---------------------------------------------------------------------------
    \15\ National Intelligence Law of the People's Republic, (Adopted 
at the 28th meeting of the Standing Committee of the 12th National 
People's Congress on June 27, 2017), (China). (https://cs.brown.edu/
courses/csci1800/sources/2017_PRC_NationalIntelligenceLaw.pdf)
    \16\ Bernadette Carreon, Aubrey Belford, and Martin Young, 
``Pacific Gambit: Inside the Chinese Communist Party and Triad Push 
into Palau,'' Organized Crime and Corruption Reporting Project, 
December 12, 2022. (https://www.occrp.org/en/investigations/pacific-
gambit-inside-the-chinese-communist-party-and-triad-push-into-palau)
---------------------------------------------------------------------------
    This braided approach of commerce, strategy, and criminality often 
leads to the weakening of the rule of law and state institutions. This 
`entropic warfare' can contribute to political and social 
fragmentation, even chaos, and facilitates the rise of a domestic 
constituency ready to serve as PRC proxies in exchange for backing. It 
also lays the groundwork for (potentially violent) transnational 
repression.
    The most recent reported example of a major milestone on this 
trajectory is the China-Solomon Islands security deal,\17\ which allows 
for the deployment of PLA troops in Solomon Islands to maintain social 
order as well as to protect Chinese citizens and major projects.
---------------------------------------------------------------------------
    \17\ Kate Lyons and Dorothy Wickham, ``The Deal that Shocked the 
World: Inside the China-Solomons Security Pact,'' The Guardian (UK), 
April 20, 2022. (https://www.theguardian.com/world/2022/apr/20/the-
deal-that-shocked-the-world-inside-the-china-solomons-security-pact)
---------------------------------------------------------------------------
    Less reported, but just as concerning, is the fact that the pro-PRC 
Prime Minister of Solomons used a Chinese slush fund to pay off 39 of 
the 50 Members of the Parliament--enough to amend the constitution and 
postpone the elections that were due to be held this year.\18\
---------------------------------------------------------------------------
    \18\ Cleo Paskal, ``How China buys foreign politicians: A case 
study,'' The Sunday Guardian (India), September 5, 2021. (https://
sundayguardianlive.com/news/china-buys-foreign-politicians-case-study)
---------------------------------------------------------------------------
    The Solomons parliament building is on the island of Guadalcanal 
and was built with U.S. money to honor the Americans who died at the 
Battle of Guadalcanal. There was a commemoration of the 80th 
anniversary of that battle last summer. The event was attended by 
Ambassador Caroline Kennedy, whose father, John F. Kennedy, was saved 
by two Solomon Islanders after his boat was rammed by the Japanese in 
World War II. The pro-PRC Prime Minister did not show up for the 
commemoration.\19\
---------------------------------------------------------------------------
    \19\ Kirsty Needham, ``Solomons PM's absence from memorial service 
was a `missed opportunity,' U.S. official says,'' Reuters, August 8, 
2022. (https://www.reuters.com/world/asia-pacific/solomons-leader-did-
not-attend-us-war-memorial-service-snub-media-report-2022-08-08)
---------------------------------------------------------------------------
China's Greater East Asia Co-Prosperity Sphere

    China's ambitions go well beyond the Solomons. In May and June 
2022, at a time when many of the countries involved still had covid 
entry restrictions in place, China's Foreign Minister Wang Yi and 
entourage was waved in to eight Pacific Island Countries (PICs). During 
that trip, two other China-drafted agreements were circulated giving a 
sense of Beijing's comprehensive and extensive ambitions for the 
region.\20\
---------------------------------------------------------------------------
    \20\ Cleo Paskal, ``China Launches Empire Building Exercise in 
Pacific Theatre,'' The Sunday Guardian (India), May 29, 2022. (https://
www.sundayguardianlive.com/news/china-launches-empire-building-
exercise-pacific-theatre)
---------------------------------------------------------------------------
    Wang proposed a ``China-Pacific Island Countries Common Development 
Vision'' supported by a ``China-Pacific Island Countries Five-Year 
Action Plan on Common Development (2022-2026).''
    Elements of the ``Vision'' \21\ include: law enforcement 
cooperation, incorporating ``immediate and high-level police 
training;'' ``cooperation on network governance and cyber security,'' 
including a ``shared future in cyberspace;'' the ``possibility of 
establishing [a] China-Pacific Island Countries Free Trade Area;'' 
enhancing ``cooperation in customs, inspections and quarantine;'' 
creating ``a more friendly policy environment for cooperation between 
enterprises;'' setting up Confucius Institutes; training young 
diplomats; establishing a ``China-Pacific Island Countries Disaster 
Management Cooperation Mechanism,'' including a prepositioned ``China-
Pacific Island Countries Reserve of Emergency Supplies,'' and more.
---------------------------------------------------------------------------
    \21\ @CleoPaskal, Twitter, May 26, 2022. (https://twitter.com/
CleoPaskal/status/15298676659924 74626)
---------------------------------------------------------------------------
    The ``Action Plan'' \22\ includes: ``a Chinese Government Special 
Envoy for Pacific Island Countries Affairs'' (who has since been 
appointed); a ``China-Pacific Island Countries Ministerial Dialogue on 
Law Enforcement Capacity and Police Cooperation'' (also completed); 
``assistance in laboratory construction used for fingerprints testing, 
forensic autopsy, drugs, electronic and digital forensics;'' 
``encourag[ing] and support[ing] airlines to operate air routes and 
flights between China and Pacific Island Countries;'' ``send[ing] 200 
medical personnel'' in the next five years; sponsoring ``2500 
government scholarships'' from 2022 to 2025, and much more.
---------------------------------------------------------------------------
    \22\ @CleoPaskal, Twitter, May 26, 2022. (https://twitter.com/
CleoPaskal/status/15298491870719 26273)
---------------------------------------------------------------------------
    Combined, the Vision and Action plans are a blueprint for influence 
(if not control) of key levers of national power. It is often reported 
that Wang's `failure' to get countries to sign on to the two documents 
was a setback for China, but it is doubtful Beijing even thought that 
was in the cards. Otherwise, Wang would have held his group meeting 
with the PIC foreign ministers at the end of his trip, after he had a 
chance to speak to more of them individually, rather than in the 
middle.
    Also, four of the countries in the region recognize Taiwan. Those 
signing up to Beijing's deal would have been striking a sudden blow-by-
proxy against their neighbors. It is not the way things are usually 
done in the Pacific.
    China would know that. It has a half-dozen think tanks dedicated to 
studying the region, has trained hundreds (if not thousands by now) of 
Pacific island bureaucrats, and has generational, focused intelligence 
on key leaders and their families. Within the countries, China has 
large footprints, often including the largest embassy (with staff that 
speak the local language), financial relationships with key business 
leaders, favorite members of the media, control of large sections of 
the retail sector, including in the relatively remote areas, and more.
    There are also less obvious levers. The Belt and Road Initiative 
seems to be expanding, including in part via World Bank and Asian 
Development Bank contracts (essentially using the money of others, 
including the United States, to pay for Chinese companies to build 
infrastructure). There is also the widespread use of Chinese organized 
crime as an `auxiliary', as has been seen in Hong Kong.
    What Wang was likely doing by floating the deal was drawing out 
those who oppose China to enable them to be isolated and targeted and 
seeing who was willing to be compliant so they could be built up and 
rewarded.
    Additionally, while the multilateral Vision and Plan went unsigned, 
Wang did sign a series of bilateral deals, some of which echoed 
elements of the Vision, in most of the countries he visited.\23\ Some 
were formalizations or expansions of existing areas of cooperation, but 
some were new, such as agreements on fingerprint laboratories. There 
seemed to be a focus on gaining access in agriculture (land), fisheries 
(seas), aviation (air), and disaster response (amphibious, 
prepositioning).
---------------------------------------------------------------------------
    \23\ ``China's whirlwind Pacific tour a slight success with several 
bilateral agreements signed,'' RNZ (New Zealand), June 4, 2022. 
(https://www.rnz.co.nz/international/pacific-news/468464/china-s-
whirlwind-pacific-tour-a-slight-success-with-several-bilateral-
agreements-signed)
---------------------------------------------------------------------------
    Apart from undermining democracy in the region and creating proto-
proxy states, PRC influence operations are having a concrete effect on 
the United States' ability to operate in the region. Washington is 
quietly being blocked out of some Pacific island ports, likely by pro-
PRC elements. In the latest case, Vanuatu failed to issue timely 
clearance for U.S. Coast Guard cutter JUNIPER (a 225' buoy tender) to 
enter Port Vila on January 26, 2023, to commence planned shiprider 
illegal, unreported, and unregulated (IUU) fishing operations. The 
ship, running out of fuel and unable to continue waiting, diverted to 
Fiji instead.\24\
---------------------------------------------------------------------------
    \24\ Cleo Paskal, ``The U.S. is blocked from ports in PRC-
Influenced Solomons, Vanuatu,'' The Sunday Guardian (India), February 
4, 2023. (https://www.fdd.org/analysis/2023/02/05/us-blocked-from-
ports-solomons-vanuatu)
---------------------------------------------------------------------------
    This was not the first time a Coast Guard cutter was blocked from 
entry in a Pacific port. In August 2022, the USCGC Oliver Henry, which 
was also on an IUU fisheries patrol, could not obtain entry to refuel 
in Solomon Islands. Solomons then declared a moratorium on naval vessel 
visits from the United States and most other countries.\25\
---------------------------------------------------------------------------
    \25\ Benjamin Felton, ``Solomon Islands Blocks All Naval Port 
Visits After U.S. Coast Guard Cutter Denied Entry,'' USNI News, August 
30, 2022. (https://news.usni.org/2022/08/30/solomon-islands-blocks-all-
naval-port-visits-after-u-s-coast-guard-cutter-denied-entry)
---------------------------------------------------------------------------
    In both cases, national governments blamed overwhelmed domestic 
bureaucracies. However, that rang hollow given: the high-profile nature 
of the incidents; the subsequent lack of effort to correct the issue 
(indeed doubling down in the case of Solomons); and the fact that these 
patrols are for something all the countries in the region say they want 
(help with illegal fishing).
The FAS

    While Oceania as a whole is of interest to China, for the same 
reason the American Pacific islands and the FAS are important to the 
United States--they give Washington a strategic bridge to the coast of 
Asia as well as a buffer against Chinese advances--they are especially 
important to China. If the United States maintains its position there, 
the rest of Beijing's plan does not work. Additionally, two of the 
three FAS recognize Taiwan, making them even greater threats to China.
    And so there are also persistent, high-priority PRC political 
warfare efforts \26\ to get the FAS to abandon, or at least downgrade, 
their defense and security relationships with the United States and to 
get Palau and Marshalls to abandon Taiwan. Here are some examples in 
each of the FAS.
---------------------------------------------------------------------------
    \26\ ``China's Influence on the Freely Associated States of the 
Northern Pacific,'' United States Institute of Peace, September 20, 
2022. (https://www.usip.org/publications/2022/09/chinas-influence-
freely-associated-states-northern-pacific)
---------------------------------------------------------------------------
Federated States of Micronesia (FSM)

    Then FSM President David Panuelo was one of the leaders concerned 
about PRC activities in the region that Wang's Pacific gambit exposed 
for targeting. After seeing Wang's proposals, Panuelo wrote \27\ to 
other Pacific Island leaders it was ``The single-most game-changing 
proposed agreement in the Pacific in any of our lifetimes.'' He added, 
``I am aware that the bulk of Chinese research vessel activity in the 
FSM has followed our Nation's fiber optic cable infrastructure, just as 
I am aware that the proposed language in this agreement opens our 
countries up to having our phone calls and emails intercepted and 
overheard.''
---------------------------------------------------------------------------
    \27\ @CleoPaskal, Twitter, May 26, 2022. (https://twitter.com/
cleopaskal/status/15300191485284 92551)
---------------------------------------------------------------------------
    The intention, he wrote, was: ``to shift those of us with 
diplomatic relations with China very close into Beijing's orbit, 
intrinsically tying the whole of our economies and societies to them. 
The practical impact, however, of Chinese control over our security 
space, aside from impacts on our sovereignty, is that it increases the 
chances of China getting into conflict with Australia, Japan, the 
United States and New Zealand, on the day when Beijing decides to 
invade Taiwan. . . . To be clear, that's China's long-term goal: to 
take Taiwan. Peacefully, if possible; through war if necessary.''
    The clarity of Panuelo's statement marked him as someone Beijing 
would not like to see in power. Perhaps coincidentally, he lost his re-
election bid. On March 9, 2023, while still President of FSM, David 
Panuelo wrote another letter \28\ in which he describes cases of what 
he calls PRC ``Political Warfare and Grey Zone activity [that] occur[s] 
within our borders.''
---------------------------------------------------------------------------
    \28\ Cleo Paskal, LinkedIn, March 10, 2023. (https://
www.linkedin.com/posts/cleopaskal_panuelo-letter-on-switch-to-taiwan-
prc-activity-7039672476045340672-8RmJ)
---------------------------------------------------------------------------
    He wrote, ``One of the reasons that China's Political Warfare is 
successful in so many arenas is that we are bribed to be complicit, and 
bribed to be silent. That's a heavy word, but it is an accurate 
description regardless. What else do you call it when an elected 
official is given an envelope filled with money after a meal at the PRC 
Embassy or after an inauguration? What else do you call it when a 
senior official is discreetly given a smartphone after visiting 
Beijing? . . . What else do you call it when an elected official 
receives a check for a public project that our National Treasury has no 
record of and no means of accounting for?''
    The effect, he wrote, is ``Senior officials and elected officials 
across the whole of our National and State Governments receive offers 
of gifts as a means to curry favor. The practical impact of this is 
that some senior officials and elected officials take actions that are 
contrary to the FSM's national interest, but are consistent with the 
PRC's national interests.''
    He then described the outcomes of this corrosion of the body 
politic. ``So, what does it really look like when so [many] of our 
Government's senior officials and elected officials choose to advance 
their own personal interest in lieu of the national interest? After 
all, it is not a coincidence that the common thread behind the Chuuk 
State secession movement, the Pohnpei Political Status Commission and, 
to a lesser extent, Yap independence movement, include money from the 
PRC and whispers of PRC support. (That doesn't mean that persons 
yearning for secession are beholden to China, of course--but, rather, 
that Chinese support has a habit of following those who would support 
such secession).''
    The results, he wrote, are: ``At worst in the short-term, it means 
we sell our country and our sovereignty for temporary personal benefit. 
At worst in the long-term, it means we are, ourselves, active 
participants in allowing a possible war to occur in our region, and 
very likely our own islands and our neighbors on Guam and Hawaii, where 
we ourselves will be indirectly responsible for the Micronesian lives 
lost.''
    This led him, in the letter, to describe discussions that he had, 
at his request, with the Foreign Minister of Taiwan, Joseph Wu, about 
either recognizing Taiwan or initializing an agreement for a Taipei 
Economic & Cultural Representative Office (TECRO) in Micronesia. A core 
reason for that, he explained, is ``greatly added layers of security 
and protection that comes with our country distancing itself from the 
PRC, which has demonstrated a keen capacity to undermine our 
sovereignty, reject our values, and use our elected and senior 
officials for their purposes.''
    Given how important the region is to China strategically, he knows 
how dangerous this is to him personally, and he added: ``I am acutely 
aware that informing you all of this presents risks to my personal 
safety; the safety of my family; and the safety of the staff I rely on 
to support me in this work. I inform you regardless of these risks, 
because the sovereignty of our nation, the prosperity of our nation, 
and the peace and stability of our nation, are more important. Indeed, 
they are the solemn duty of literally each and every single one of us 
who took the oath of office to protect our Constitution and our 
country.''
    That offer to switch to Taiwan was not followed up. Based on 
personal discussions in Taiwan and Washington, it seems possible that 
Taiwan felt it could not move without U.S. approval, and the State 
Department was not supportive. On May 11, 2023, David Panuelo left 
office. The opportunity was lost and the undermining of FSM democracy--
and potentially relations with Washington--continues. What is going on 
in FSM is far from unusual in the region; what is unusual is having a 
president say it out loud.
Republic of Marshall Islands (RMI)

    The Marshall Islands recognizes Taiwan and is home to the U.S. 
military's Ronald Reagan Ballistic Missile Defense Test Site. 
Undermining either of those relationships would greatly benefit China's 
strategic goals. One operation that could have done that featured two 
China-linked Marshallese nationals involved, according to the U.S. 
Government, in ``a multi-year scheme that included establishing a 
nongovernmental organization and allegedly bribing officials in the 
Republic of the Marshall Islands with the intention of establishing a 
semi-autonomous region, akin to Hong Kong, in the U.S.-defended 
Marshall Islands.'' \29\
---------------------------------------------------------------------------
    \29\ U.S. Immigration and Customs Enforcement, Press Release, ``ERO 
New York City removes noncitizen aggravated felon to the Marshall 
Islands,'' April 27, 2023. (https://www.ice.gov/news/releases/ero-new-
york-city-removes-noncitizen-aggravated-felon-marshall-islands)
---------------------------------------------------------------------------
    That attempt came within one vote of succeeding in the Marshall 
Islands parliament. The couple involved were charged in New York and 
pleaded guilty, meaning the names of the Marshallese who were bribed 
didn't become public, potentially leaving some of them to run in the 
upcoming November 2023 elections without that information being made 
available to the electorate. More concerning, the United States 
deported one of the criminals involved in the bribery back to the 
Marshall Islands, where she is now walking free, able to re-establish 
her linkages with local elites.\30\
---------------------------------------------------------------------------
    \30\ Ibid.
---------------------------------------------------------------------------
Republic of Palau

    The president of Palau (another country that recognizes Taiwan), 
Surangel Whipps Jr., is a staunch defender of democracy. He has 
consistently supported Taiwan, even when it has had a detrimental 
effect on Palau's economy (at least in the short-term). For example, 
China built up Chinese tourism to Palau then suddenly pulled all its 
tourists out in an attempt to crash the Palauan economy and force it to 
derecognize Taiwan.\31\
---------------------------------------------------------------------------
    \31\ Farah Master, ``Empty hotels, idle boats: What happens when a 
Pacific island upsets China,'' Reuters, August 19, 2018. (https://
www.reuters.com/article/us-pacific-china-palau-insight-idUSKBN1L4036)
---------------------------------------------------------------------------
    Palau stood firm. Recently, Whipps, who has also offered the United 
States a base, said, ``A Chinese Ambassador asked us to have diplomatic 
relations with China and we said, `we have no problem having diplomatic 
relations with China.' What we have a problem with is [China] telling 
us that we cannot have diplomatic relations with Taiwan [. . .] We see 
that tensions are rising, we believe in `presence is deterrence'. It 
just reminds us that we all need to be prepared because do not want to 
ever go through World War 2 again. It is important that we align 
ourselves with people that believe in boundaries, rule of law, 
democracy and freedom because we need to protect those values.'' \32\
---------------------------------------------------------------------------
    \32\ Rachael Nath, ``Pacific must `stand together' on Taiwan 
issue--Palau's Surangel Whipps Jr,'' RNZ (New Zealand), April 20, 2023. 
(https://www.rnz.co.nz/international/pacific-news/488336/pacific-must-
stand-together-on-taiwan-issue-palau-s-surangel-whipps-jr)
---------------------------------------------------------------------------
    Palau also has an election coming up in less than a year and a 
large Chinese organized crime presence,\33\ and Whipps' current chances 
at re-election are not considered promising.
---------------------------------------------------------------------------
    \33\ Bernadette Carreon, Aubrey Belford and Martin Young, ``Pacific 
Gambit: Inside the Chinese Communist Party and Triad Push into Palau,'' 
Organized Crime and Corruption Reporting Project, December 12, 2022. 
(https://www.occrp.org/en/investigations/pacific-gambit-inside-the-
chinese-communist-party-and-triad-push-into-palau)
---------------------------------------------------------------------------
Conclusion

    The three FAS are considered high value targets by Beijing. All are 
only an election away from being absorbed into China's version of the 
Greater East Asia Co-Prosperity Sphere. There are leaders willing to 
take principled and courageous stands for democracy, Taiwan, and the 
U.S. relationship--and they are the ones warning what is coming. But 
they may not be around for long. As seen with Solomons, all China has 
to do is capture a couple dozen of the elite in the FAS to blow a hole 
in the foundation of the U.S. Pacific defense architecture.
    What to do? All the usual ``should have been done already'' 
recommendations: return the Peace Corps to the region, apologize to the 
Marshall Islands for the nuclear testing, sort out the treatment of 
U.S. military veterans from the FAS, get better connectivity and 
transport into the region to make it easier to connect with the United 
States, stop arguing over the relatively tiny amounts of U.S. 
government spending involved in the COFAs (compared to the incalculable 
cost of trying to `win them back', if it were even possible), etc. This 
list is easily available, as the issues have been languishing, in some 
cases, for decades.

But underpinning all that is the need to:

    Acknowledge that the relationship between the United States and the 
FAS is unique, forged by mutual sacrifice and is essential for U.S. 
security (a State or Defense Department posting to the FAS should be 
considered as important a career milestone as one in Paris--as this 
really is the front line). Lumping the FAS together under the general 
``Pacific islands'' category is inaccurate and insulting given the 
nature of the relationship. Other Pacific island countries will 
understand privileging the FAS, and, in fact, it might make a closer 
relationship with the United States seem more attractive to them. So, 
for example, on May 22, 2023, President Joe Biden will be visiting 
Papua New Guinea (PNG) on his way from Japan to Australia in what is 
being called the first visit by a sitting President to a Pacific island 
country. Palau is on that route as well. Why PNG and not Palau or 
another FAS?

    Understand that democracy is under attack across the region and 
needs defending. Solomons has seemingly gotten away with `delaying' 
elections. That is being presented by Beijing as a sales point for a 
close relationship with China to other proto-dictators. Allowing that 
to stand in Solomons puts democracy elsewhere at risk. Free and fair 
elections need to happen in Solomons as soon as possible. Additionally, 
in the FAS, extremely careful attention must be paid to election 
integrity--especially as both Marshall and Palau have elections coming 
up. China got its candidate elected in Maldives by funnelling money to 
the ex-pat Maldivian community in Sri Lanka in order to garner him the 
extra votes needed to win. Marshalls and Palau have no way to monitor 
campaign spending in their substantial ex-pat communities, many of whom 
are in the United States. Help from Washington could make a substantial 
difference.

    Back those fighting for the things we consider shared values and--
it seems odd to even have to say this--that are in the U.S. interest. 
It is inexplicable that Panuelo's offer to recognize Taiwan was passed 
up. Had that happened, it would have undermined China's whole 
`inevitability' narrative about peeling off countries from Taiwan one 
by one. We are fighting on a political warfare battlefield (for now). 
We are (at best) on defense. When someone is willing to make a 
courageous move based on principles, not backing them just hands China 
another example to shop around about why not to take Washington 
seriously.

    Do not outsource American interests. Since the end of the Cold War, 
there has been a seeming inclination to defer to Australia and New 
Zealand on many `Pacific islands' issues. Apart from not honoring the 
unique bilateral relationships the United States has with the FAS, this 
clearly has not worked or else the region would not be in the position 
it is in now. In many areas and sectors, Australia and the United 
States work together well and have the same priorities. However, they 
are different countries and divergence should not be a surprise. For 
example, U.S. security concerns in Solomons could well take second 
place in Canberra's decision-making to Australian desires to have a 
better trade relationship with China. Additionally, while keeping 
bilateral priorities in mind, working with a wider range of allies that 
are welcome in the PICs can be beneficial. Japan, in particular, is 
doing excellent, if quiet, work across the region. Taiwan and India 
also have much to offer.

    Military engagement in the FAS need not be larger, but it should be 
appropriate. That likely means fielding permanent, compact, small teams 
led by young officers who pay attention to those around them and adapt 
easily. Permanent presence is essential to avoid the ephemeral `cargo 
cult' effect that is engendered by U.S. forces periodically showing up 
and then leaving, or generals and admirals dropping by for a short 
visit and leaving thinking everything is fine. Contractors should be 
limited and be supervised carefully to ensure they are not damaging 
trust.

    Move from Maritime Domain Awareness (MDA) to Maritime Domain 
Enforcement. For many countries in the region, fisheries have the 
potential to create stabilizing economic benefits for the people; 
however, illegal fishing is rampant, as is drug smuggling, human 
trafficking, and more. There are myriad `MDA' workshops, but precious 
little enforcement. Locals will repeatedly say, `we know about all 
sorts of illegal activities happening in our waters--but we do not have 
the capacity to do anything about it.' Following the law to seize and 
destroy a few of the illegal fishing boats would do more good than a 
year's worth of MDA workshops.
    Support the building and growth of domestic, independent capacity 
to identify and counter challenges ranging from organized crime to 
environmental disasters. This has begun in Palau, where the office of a 
national security coordinator (NSC) has proven of exceptional worth. 
The United States should support the FAS if they choose to replicate 
and expand the NSC concept in the other FAS.

    Aggressively go after dirty money. Currently, there is no downside 
to accepting Chinese money--no loss of assets, no loss of position, no 
loss of visas. In fact, the U.S. government just gave a free ride back 
to the Marshalls to a person already convicted of bribing officials. 
Unless the money is cut off, and costs incurred, it will be very hard 
to get anything else to work. Under the Compacts, the United States is 
actually obligated to do this. It has an ``obligation to defend the 
Marshall Islands and the Federated States of Micronesia [and Palau] and 
their peoples from attack or threats.'' \34\ One would think the 
deliberate destruction of democracy counts as a threat.
---------------------------------------------------------------------------
    \34\ Compact of Free Association Act of 1985. Pub. L. 99-239 (99th 
Congress), 99 Stat. 1770, codified as amended at 48 USC Sec. 1681. 
(https://www.congress.gov/99/statute/STATUTE-99/STATUTE-99-Pg1770.pdf)
---------------------------------------------------------------------------
    Across Oceania, but especially in the FAS, the United States is at 
imminent risk of having the relationships it has long taken for granted 
severely weakened, with the PRC using political warfare to `island hop' 
east and south in order to set up what are effectively forward 
operating locations able to, yes, push the United States `back to 
Hawaii'. This has the potential to change the security dynamics of the 
Pacific in the most fundamental way we have seen since the end of World 
War II. The honest leaders of the region know it, and are trying to 
tell us, for the sake of their people, and for the sake of America. We 
owe it to them, and to those who died the last time this happened, to 
listen.

[GRAPHIC] [TIFF OMITTED] T2350.001


    .epsMap by Pavak Patel and Cleo Paskal

                                 ______
                                 

Questions Submitted for the Record to Cleo Paskal, Non-Resident Senior 
             Fellow, Foundation for Defense of Democracies

            Questions Submitted by Representative Westerman
    Question 1. How specifically has the CCP been working to infiltrate 
the FAS politically. How can U.S. respond to counter CCP political 
infiltration into the FAS?

    Answer. The Chinese Communist Party (CCP) has a toolkit of 
political warfare weapons that it uses to infiltrate and then, if it 
can, control, the FAS (and elsewhere) politically. Many approaches are 
tried at once. Those that open up cracks are doubled down upon, though 
efforts continue in other areas as well.
    Very broadly, major operations are usually ``braided,'' with three 
mutually reinforcing strands.
    First, the initial approach may be designed to look commercial--for 
example, as with the attempted setting up of the Rongelap Atoll Special 
Administrative Region (RASAR) in the Marshall Islands under the guise 
of economic development.
    Second, the PRC combines this with a strategic goal. So, in the 
case of RASAR, the attempted setting up of a country-within-a-country 
was designed to undermine the sovereignty of the Marshall Islands, 
drive a wedge between the Marshall Islands and the United States/
Taiwan, and act as a launch site for other PRC operations.
    Third, corruption and criminal activity are threaded throughout--in 
the case of RASAR, that manifests as bribery of senior officials.
    One can see a similar braided approach with the various PRC-linked 
port and fisheries projects that are branded as economic development 
(commercial), but that undermine a nation's maritime and border 
security (strategic), in part through buying off key officials 
(corruption). The officials may think they are just `making a bit of 
money on the side', without fully realizing the strategic 
vulnerabilities that are being injected into their systems.
    The same is true for corruption that results in PRC-linked 
companies winning contracts for installing critical infrastructure, for 
example Huawei towers in Solomon Islands. For more examples, please see 
the 9 March 2023 letter from then Federated States of Micronesia 
President David Panuelo.
    All of this is wrapped up in layers of protective information 
warfare, using paid-for traditional media, social media, social events, 
trips to China and more, backed by a very good intelligence network 
that gives China insight into who to target, and how.
    How to counter it? Do what we should be doing anyway and go after 
the strand that reinforces the commercial and strategic and that gives 
the CCP its unfair advantage: the corruption.
    Currently, there is almost never any downside to taking Chinese 
money: No loss of money, assets, status, visa access to the United 
States, etc. Indeed, in the case of RASAR, none of the Marshallese who 
were bribed were exposed by the United States, let alone charged. And 
one of the convicted Chinese criminals involved was even deported by 
the United States back to the Marshalls, where she is now free to 
continue her operation. This is a moral, legal, and strategic failure.
    There are many brave FAS citizens trying to keep their countries 
secure, as evidenced by President Panuelo's letter, the work of the 
Palau national security coordinator, and others. But the longer they 
are unsupported, the more worn down they become and the fewer their 
numbers will be. It is also often difficult for local investigators and 
prosecutors to bring to trial the higher profile cases due to how 
close-knit the local societies are.
    Very public investigations into CCP corruption and criminal 
activities in the FAS (and Guam and CNMI) should be undertaken by the 
relevant U.S. agencies and departments. That can include supporting the 
appointment of special prosecutors with specific remits to investigate 
corruption.
    In the case of FAS citizens, if found guilty of taking money that 
links back to foreign malign actors, there should be a revocation of 
the right to enter the United States.
    These measures can be bolstered by congressional hearings into the 
issue and congressional visits to the region to hear first-hand about 
the challenges.
    Additionally, there should be support for domestically controlled 
national security coordination offices in each of the FAS. Palau was 
the first to establish such a post and it has proven invaluable for 
domestic security coordination and streamlining security and defense 
collaboration with international partners, in particular the United 
States.
    Question 2. What is one of the biggest threats to the people of the 
Pacific Islands?

    Answer. As described above, there is a focused, well-funded, and 
well-resourced CCP-led attempt to undermine sovereignty of Pacific 
Island countries in order to extend PRC influence across the region. 
The result is an exportation of the same centralized, brutal, 
extortionate, and environmentally and socially destructive system one 
finds in the PRC.
    Which is the point: At its very core, this is a battle of systems: 
authoritarianism versus democracy.
    This is why the institutions that support democracy (free press, 
independent judiciary, even elections themselves) are among the first 
targets of PRC influence operations. This strategy was explicitly 
described in the book Unrestricted Warfare, written by two People's 
Liberation Army (PLA) Air Force Colonels in 1999.
    As seen in Solomon Islands, each country is only one election away 
from a PRC proxy taking power and, in the case of Solomons, literally 
doing away with democracy (in this case by `delaying' elections).
    Unless there is democracy and reasonably honest and consensual 
government, nothing else will work. All the USAID projects, signing of 
agreements, Pacific Island Forum visits, etc., can't accomplish 
anything if the people in power are authoritarians in hock to Beijing.
    For example, if the United States signs a deal with Papua New 
Guinea (PNG) to put in a naval base but then the government of PNG is 
elite captured by China, all that's happened is the United States has 
built a base for China--unless Washington wants to forcibly hold on to 
the base when asked to leave, which in itself would be an information 
warfare win for Beijing.

    Question 3. What solutions should be prioritized?

    Answer. Democracy needs to be promoted and protected. At a minimum, 
this requires a combination of diplomacy and the cutting off of the 
flow of the illegal money that is distorting democracy.
    A high priority on the diplomacy front is working to ensure the 
pro-PRC government in Solomons isn't allowed to get away with delaying 
elections--it should be publicly called out and the Pacific Games 
(which were used as the excuse to delay elections) should be boycotted 
until elections are held. Any country that attends the games should be 
tagged as caring more about sports than democracy. A stand should be 
taken, not just to protect democracy in Solomons, but so that others 
are dissuaded from trying something similar. The United States is being 
tested.
    On the money front, here are two ideas of many: First, track the 
illegal money and prosecute the corrupt officials (and enlist the 
assistance of Australia and New Zealand to do the same); second, ensure 
careful oversight of campaign funding going to sway FAS voters in the 
United States.
    These are some measures that would not only help liberate the 
Pacific Islands from PRC political warfare, they would also show those 
fighting for their own sovereignty across the Pacific Islands that the 
United States of America has their back.

            Questions Submitted by Representative Radewagen

    Question 1. You highlight in your testimony that the PRC utilized a 
slush fund to pay off 39 of 50 Members of the Solomon Islands 
Parliament in connection with the security agreement reached there and 
that President David Panuelo of the FSM also recently described in an 
open letter the effects of PRC corruption locally as well--can you 
elaborate for the committee on the patterns of PRC corruption to 
undermine local governments in the Pacific?

    Answer. Just to elaborate, the 39 or the 50 seem to have been 
bought off to make Prime Minister Sogavare `Motion of No Confidence' 
proof (and so ensure a PRC proxy was in place and could deliver the 
security agreement) as well as to ensure that Sogavare had enough votes 
to amend the constitution in order to delay elections. They delivered 
on both counts.
    It is also worth noting that the process allowed the PRC to 
identify compliant politicians it can cultivate (Sogavare is convenient 
to Beijing but eminently replaceable) as well as reticent ones it will 
target for removal from politics.
    I describe some of the ways local governments are undermined in the 
replies to Chairman Westerman's questions above, but it's worth adding 
that Chinese organized crime is an integral part of the PRC's 
operations. They bribe, enforce, smuggle, blackmail, and more.
    While largely free to make their own money and develop their own 
networks, Chinese criminals do so with the understanding that they must 
be useful to Beijing when required (as made explicit in the PRC's 2017 
National Intelligence Law). As a result, they become very difficult to 
extract from a country as Beijing will often refuse to allow them to be 
deported back to China, and Pacific Island countries don't have the 
resources to charge or jail them or fight Beijing on deportation.
    As a result, in some places, there are scores, if not hundreds, of 
Chinese `undesirables'--people identified by the affected Pacific 
Island country as a problem for the state--walking free, undermining 
governance at a very fundamental level.

    Question 2. In your written testimony, you envision moving away 
from ``Maritime Domain Awareness'' to ``Maritime Domain Enforcement''. 
Can you elaborate further on that? And what additional resources, the 
United States may need to allocate to ensure that enforcement can be 
done effectively.

    Answer. This is a foundational question that warrants a hearing of 
its own with experts from across a wide range of fields, including 
military, financial, fisheries, and more. As Dr. Watson said at the 
hearing, fisheries should be considered a national security issue for 
the United States.
    One reason is that while illegal, unreported and unregulated (IUU) 
fishing is profitable and possibly necessary for food importer China, 
it also serves as an excuse to `flood the zone' with China's dual use 
fishing fleet, some of which contains a serious criminal element (that 
also turns a nice profit).
    China will not give this up easily. It will put pressure on local 
governments and try to undermine patrols and enforcement efforts. It is 
likely not a coincidence that U.S. Coast Guard ships on IUU patrol have 
had trouble landing in ports in Solomon Islands and Vanuatu, affecting 
their ability to do their work.
    Apart from enforcement at sea (the specifics of which are best left 
to those more expert than me), one will need a plan to `protect' the 
execution of any enforcement policy, including dealing with local 
corruption and giving backing to local governments trying to stand 
their ground against pressure from Beijing.
    This is where direct U.S. government involvement and support is 
essential. Few countries will take on China by themselves. U.S. 
intelligence has a role to play as do U.S. diplomats and also a 
comprehensive political warfare effort (with an economic component) 
that improves the local environment so IUU fishing can't operate.
    So, what's needed? More than anything, a change of mind-set from 
the administration on down through the State Department and Department 
of Defense (in particular).
    Local nations know they have a problem with IUU and don't need to 
be reminded of it. They need help doing something about it. They lack 
the resources--particularly ships and personnel. In the case of Palau, 
for example, their biggest ship is barely a match for a single Chinese 
fishing boat--much less a double-hulled, armed, maritime militia boat. 
And it would stand no chance against a Chinese `government' ship.
    A `total' approach to the IUU problem--that covers surveillance 
through enforcement--needs to be employed and considered a priority by 
the U.S. government. It currently is not a top priority--even though it 
is THE major priority to many Pacific Island countries.
    To get a sense of the overmatch, while the U.S. Coast Guard is 
making efforts, to cover the vast Pacific Ocean west of Hawaii, the 
Coast Guard has approximately three Medium Endurance Cutters--with 
maybe another one being deployed in the next year. A total of four 
ships. It has three shorter ranged Fast Response Cutters--with perhaps 
four more received and deployed in the fairly near future.
    That's at best seven Coast Guard ships to cover the Western 
Pacific, a zone larger than the continental United States. It's a huge 
expanse and seven ships is just seven ships--some of which will be in 
port for a period of time. Imagine patrolling the U.S. with seven 
police cars that go around 30 miles per hour.
    Without the ability to intercept, search, and detain, it's sort of 
like watching a shoplifter but not intervening. Indeed, it seems as 
though the United States and other Western and larger regional nations 
glide over the problem as if someone else will handle enforcement.
    One should consider U.S. military support to FAS illegal fishing 
operations as a proper activity relating directly to these nations' 
`national defense' for which the United States has responsibility under 
the Compacts of Free Association (needless to say, this is also the 
case for U.S. territories). USINDOPACOM needs to see it as such, 
especially given the dual-use nature of the PRC fishing fleet. Indeed, 
this would be a tangible `push back' against Chinese encroachment and 
influence--or just plain theft of our allies' natural resources and a 
danger to their economic security.
    The IUU fishing problem--and enforcing laws against it--should also 
be considered from a broader perspective. For example, penalties can be 
applied `asymmetrically.' Given that most of the IUU fishing is 
Chinese, we should apply financial and economic pressure on other 
Chinese entities that are related to fishing, however broadly. For 
example, we should delist from U.S. exchanges companies that finance 
and construct the fleets, ports, and docks involved in illegal 
fisheries, applying tariffs to Chinese fisheries products, restricting 
U.S. technology and financial flows into the PRC if any connection can 
be made to the fleet. Given the military-civil fusion nature of the 
PRC, this may be quite helpful.
    At the same time, apart from playing defense, one should also go on 
`offense' economically and prioritize the redevelopment of an American 
fishing fleet and processing capability so there is broader incentive 
to make sure everyone is playing by the rules and local economies are 
more likely to benefit.

               Questions Submitted by Representative Case

    Question 1. During my time for questions in our hearing, I misspoke 
when describing the Government Accountability Office's reported fiscal 
impact from Compact residents on local communities. I noted that 
localities collectively reported $1.8 billion in costs between 2004 and 
2018 when in reality that figure in the GAO report is $3.2 billion. If 
Congress were to expand the same eligibility for federal benefits to 
Compact migrants as are currently extended to lawful permanent 
residents, what uncovered costs from delivering still-uncovered 
services would host communities have to cover without federal aid?

    Answer. Not my area.

    Question 2. Citizens of the Freely Associated States are eligible 
to join the U.S. military and frequently serve in our armed forces. 
What proportion of the population from the Freely Associated States 
joins the U.S. military compared to other U.S. communities? What are 
the challenges veterans in the Freely Associated States experience in 
accessing Department of Veterans Affairs health care and other benefits 
when they return home to their countries? What can be done to improve 
this?

    Answer. I understand there is work on this topic related to the 
COFA negotiations, and I can just go by what is publicly available. As 
such, my comments are general and may be overtaken by new initiatives 
(and I hope they will be).
    As with VA services in general, even in the United States, the key 
issues are 1) awareness of available services; 2) accessibility to 
services; and 3) receiving proper services.
    These are long-standing problems for many veterans living in the 
United States. However, things are much worse for veterans from the FAS 
by virtue of the restrictions on VA activities and operations in 
foreign countries. This is exacerbated by the distance and expense 
required to travel to U.S. territory to access health care benefits or 
to receive care.
    As a result, many FAS veterans are unable to access VA services and 
health care and are effectively abandoned by the VA (and the government 
they served) once they return to their home country.
    When considering how, and whether, to improve this situation, one 
must remember that while the FAS are indeed `foreign' countries, they 
are also the only three nations on earth that have formally entrusted 
their national defense to the United States. Not only have FAS citizens 
volunteered to risk their lives on behalf of the United States, the 
entire countries have volunteered to be a critical part of U.S. 
defenses.
    An adjustment to U.S. law that allows the VA to operate in the FAS 
as if it were U.S. territory is necessary, given the FAS's unique 
circumstances.
    Until this can be accomplished, the VA needs to make the FAS and 
serving its veterans a priority. It currently is not. In fact, veterans 
seem to be losing some services. One veteran in Marshall Islands, who 
served for over two decades with the U.S. Army and was a recruiter, 
said that up until about a decade ago, veterans could get their VA 
medicine posted to them. (The FAS have local U.S. postal codes.) Then 
that stopped. That should be restarted, as a priority.
    Appropriate `work arounds' can be accomplished to ensure FAS 
veterans are served as close to possible as if they were U.S. veterans 
in the United States. This includes easy use of local medical services 
without out-of-pocket expenses or labyrinthine reimbursement 
procedures.
    As a part of that, each U.S. Embassy in the FAS should have a VA 
ombudsman--either VA staff or contracted--to serve local veterans who 
are otherwise intimidated by the prospects of navigating the Veterans 
Administration.
    While permanent services are being set up, we should consider 
regular deployments of U.S. military medical teams to the FAS for set 
periods of time, say, quarterly, to provide basic medical services, to 
include mental health care.

    Question 3. Funding for the Compacts of Free Association is 
currently borne by the Department of the Interior and the Biden 
administration suggests moving that funding the Department of State but 
to keep administration of the Compacts within the Department of the 
Interior. Given the critical role the Compacts of Free Association to 
our national security and to the Department of Defense, should the 
Department of Defense also bear some of these costs?

    Answer. I give my answer knowing that changing such a fundamental 
aspect of the COFAs might be extremely difficult at this stage. 
However, it is worth pointing out that of any U.S. Government 
department, the Department of Defense has:

     By far the greatest number of people in the FAS;

     The most regular interactions with people in the region;

     The most comprehensive and up-to-date knowledge about the 
            countries; and

     The greatest interest in ensuring good relations.

    So, for example, on one small island in Palau, there are scores of 
Marines living for months among the locals, learning, making friends, 
playing baseball, improving infrastructure, etc. That one island alone 
has far more Americans living much more closely with Palauans than the 
State Department has at the U.S. Embassy.
    Additionally, with the large number of FAS citizens who served in 
the U.S. military, there is a common cultural bridge with which to work 
(and, given the treatment of veterans, it should be improved anyway).
    The Department of Defense, including the Reserves (possibly through 
a National Guard State partnership program), has all the skills and the 
motivation needed to work with the FAS to improve education, health, 
infrastructure, accounting, investigations, etc. over the long run. 
Seems a lost opportunity not to include them in the process.

    Question 4. Last year the administration released the first ever 
Strategy for Pacific Island Partnership along with a more detailed 
Roadmap to a 21st Century U.S. Pacific Islands Partnership. How was 
this and recent efforts to reengage the region seen by the Pacific 
Islands? What role can Congress play to help implement the Pacific 
Islands Partnership Strategy?

    Answer. Pacific Islanders tend to be understandably pragmatic to 
the point of jaded about `policies' and `strategies.' Unless they can 
see tangible results (lower energy costs, better telecoms, better 
schools, more jobs, rain water capture systems, help with illegal 
fisheries, lower cost flights to the United States and within the 
region, etc.), it doesn't really resonate. So, for example, while the 
opening of the embassies in Solomon Islands and Tonga seems like a good 
advance (as per the strategy), the fact that neither offer consular 
services turns them into a disappointment for most locals.
    Congress would be well placed, including through hearings, to try 
to ensure that activities under the strategy produce real results on 
the ground.

    Question 5. The Pacific Islands Forum, a critical inter-
governmental organization in the Pacific Islands region, laid out a 
regional vision for development of the Pacific Islands in its 2050 
Strategy for the Blue Pacific Continent. How can the United States 
support this strategy?

    Answer. It's worth noting the heavy emphasis on the Pacific Islands 
Forum (PIF) doesn't resonate with most Pacific Islands citizens. They 
PIF seemingly plays little to no role in their daily lives, and the 
bureaucrats sent there often have weak connections to their communities 
(they aren't elected to the PIF, so they tend to be beholden to 
bureaucracies, for what are considered plum postings, and not to their 
fellow citizens). Additionally, the United States isn't even a member 
of the PIF.
    It might be worth Congress learning more about, and looking more 
toward, the well-respected Pacific Community (https://www.spc.int/), 
the region's scientific and technical organization of which the United 
States is a member, to find grounded, local, practical solutions to 
many of the challenges facing Pacific Islanders.

                                 ______
                                 

    Ms. Hageman. I thank the witness for their testimony, and 
the Chair will now recognize Chairman Westerman for his opening 
statement.

  STATEMENT OF THE HON. BRUCE WESTERMAN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ARKANSAS

    Mr. Westerman. Thank you, Chairman Hageman, and also thank 
you to the witnesses for being here today as we convene to take 
testimony from expert witnesses on the preservation of U.S. 
critical interests in the Pacific Islands and, more broadly, 
the Indo-Pacific Region.
    Today's hearing will focus on regional outcomes that impact 
the well-being of our fellow Americans living in our nation's 
domestic island territories located in the increasingly 
contested geopolitical region of the Pacific. The record we 
create today will support the mission and work of this 
Committee to ensure that U.S. citizens and our locally self-
governing U.S. territories of American Samoa, Guam, and the 
Northern Mariana Islands benefit and prosper under the American 
model of democracy, market-driven economics, responsible 
environmental stewardship, and of course, strong national 
defense.
    The United States also has sovereignty and responsibility 
for outposts in the Pacific that includes Jarvis, Howland, 
Baker, Wake, Midway, Johnston, and Palmyra Islands. We need to 
remember that those U.S. lands in the Pacific, including the-
then U.S. territories of Hawaii and the Philippines, were 
directly attacked and in some cases occupied by an aspiring 
imperialist dictatorship attempting to conquer the Pacific. One 
hundred thousand Americans died freeing the Pacific Islands 
from brutality and tyranny in World War II. Their sacrifices 
highlight why it is a strategic imperative to ensure a free and 
open Indo-Pacific.
    At the international level, the United States maintains an 
unprecedented political and economic partnership, as well as a 
strategically imperative security and defense alliance with 
three sovereign Pacific Island democracies through the Compacts 
of Free Association. These three countries are the Republic of 
the Marshall Islands, the Federated States of Micronesia, and 
the Republic of Palau, and are also known as Freely Associated 
States, or FAS.
    Under their individual compact agreements, the Freely 
Associated States accepted and, through their constitutional 
processes, ratified mutually-agreed terms for entering into 
free association with the United States. The U.S. relationship 
with the FAS is the closest political, economic, and strategic 
relationship the United States has with any other nation or 
group of nations.
    At this moment, the compact agreements with the Marshall 
Islands, Micronesia, and Palau are being negotiated for renewal 
by the Biden administration. In future hearings, this Committee 
anticipates addressing compact renewal, including any 
agreements reached with the Freely Associated States and sent 
to Congress by the President. This is a top priority, given the 
importance of the U.S.-FAS relationships.
    It is through regional, strategic, and mutual security 
agreements like the Compacts of Free Association that the 
United States can exercise peace through strength with our 
allies to counter increasing global threats. The greatest 
threat to global peace, prosperity, and freedom is a communist 
regime in the People's Republic of China.
    To be clear, this Committee recognizes the distinction 
between the Chinese Government and the Chinese people. Thus, 
when this Committee refers to China and the threat it poses, it 
is referring to the Chinese Government and its Communist Party.
    In the present day, China does not hesitate to engage 
opportunistically in its trademark disruption and usurpation 
tactics, targeting any nation over which it gains influence or 
control. This Committee is deeply troubled that China has, for 
at least a decade, targeted the FAS. China has even targeted 
our American territories. Beijing has employed tactics aimed at 
disruption of political order and social cohesion.
    The threat that China poses to the United States and to the 
world cannot be overstated. We must fully understand the extent 
of China's activities in the FAS and U.S. territories, and how 
engagement in the Pacific deters Chinese influence. Thus, I 
hope our witnesses today can give us frank assessments of U.S. 
interests in the Pacific and how China is working to undermine 
those threats and use the Pacific Islands as a platform for an 
enlarged threat of unrestrained aggression in the region and 
beyond.
    And as Chairman of the Committee, I am committed to working 
across the aisle. Ranking Member Grijalva and I have both 
talked about the importance of working together to make sure 
that we do what is best for the territories that we talked 
about, and also for those Freely Associated States, and what is 
best for America and, quite frankly, for the world going 
forward.
    So, this is very important. I appreciate the engagement 
today, and I look forward to questions.
    I yield back.

    Ms. Hageman. Thank you, Mr. Chairman. The Chair will now 
recognize the Members for 5 minutes for questions, beginning 
with me.
    Mr. Derek Grossman, I am going to direct my first questions 
to you. In your statement, your first recommendation for 
Congress and the U.S. Government is to ensure funding for the 
renewed Compacts of Free Association. The compacts are unique 
in the United States and provide the FAS with substantial 
economic assistance and access to Federal programs and 
services. Do you think China is prepared to make the same or a 
comparable level of long-term economic commitments to the FAS 
in order to replace the United States as a partner of choice, 
or do you believe the PRC intends to achieve its goals solely 
through less costly, short-term opportunistic engagement that 
includes tactics of disruption and political warfare?
    Mr. Grossman. Thank you for that question. Of course, it is 
difficult to know how China would react to having a 
geostrategic void, so to speak, if we could not come to a COFA 
renewal agreement.
    But what we have seen in the past, is that Chinese 
officials have consistently tried to offer better deals to 
countries that feel caught up in intensifying U.S.-China 
competition, and this can take the form of improved trading 
opportunities, as well as through Belt and Road Initiative that 
I mentioned in my opening remarks.
    But at the same time, we shouldn't think that if we were 
unable to renew the COFAs, that China would necessarily come in 
and give equal or more in yearly economic assistance to the 
Freely Associated States. I am not sure that that is something 
that we can determine at this time. But I am pretty confident 
that they would try to offer at least something that would make 
us feel like we didn't do the right thing.
    Ms. Hageman. In your testimony about China's strategy 
toward the Pacific Islands, you mentioned that one of China's 
top three priorities for the region is breaking through U.S. 
military domination of the second island chain. Can you explain 
the territories and FAS's strategic location within this island 
chain, and what capabilities or opportunities this location 
provides the United States?
    Mr. Grossman. Yes. So, I think, when China looks out at the 
region, they see concentric circles hemming them in: first 
island chain, second island chain; some say the third island 
chain is Hawaii and the Aleutian Islands of Alaska, right?
    But when we look at it, we say this is great, because we 
have points of power projection, so we can project military 
power from these regions into the theater, into the Indo-
Pacific to deal with Taiwan Strait, South China Sea, East China 
Sea, or even a Korea scenario. And China is trying its best to 
try to loosen the screws on U.S. alliances and partnerships 
throughout the entire region, but also to include in the second 
island chain.
    And the reason why the geography is so important is 
because, and my RAND colleagues and I said this back in the 
2019 report that I referenced to Congress, is it essentially 
provides having uninhibited access to a region that is the size 
of CONUS, literally, from Palau to Marshall Islands is the size 
of CONUS, to have that is like a power projection superhighway 
from Hawaii into the Pacific, right?
    So, China wants to complicate our ability to flow forces 
into the region for future contingency.
    Ms. Hageman. Thank you.
    Mr. Gray, you were the first Director for Oceania and Indo-
Pacific Security at the NSC. While President Biden has retained 
a region-specific team within the NSC, you have some 
recommendations about how to increase responsiveness of the 
senior levels of government and integrate responses into the 
National Security Strategy. To your knowledge, has the model 
that was stood up under the Trump administration been 
maintained under the current Administration?
    Mr. Gray. Thank you for the question, Chair.
    My understanding is that the position that I occupied at 
the NSC is no longer entirely devoted to the Pacific Islands, 
that it has reverted to covering Southeast Asia, as well as the 
Pacific Islands.
    Now, that is to say I do think that there has been some 
excellent focus on the Pacific by this current NSC staff, but I 
do think there is value in having a director who is entirely 
focused on the Pacific Islands. And as I said in my written 
testimony, I think there should be a director who is also 
entirely focused on our territories and possessions. Personnel 
is policy. And if you don't have someone who is day to day 
focused in these areas, you will have neglect.
    Ms. Hageman. Wonderful. Thank you for that.
    I yield back, and the Chair now recognizes the Ranking 
Minority Member, Ms. Leger Fernandez, for 5 minutes of 
questioning.
    Ms. Leger Fernandez. Thank you so much, Madam Chair, and 
thank you for the testimony to all of our witnesses today.
    It strikes me as I both read your testimony and listened to 
you today, that we all agree kind of on this common theme of 
the need to support this region, the Freely Associated States, 
each of these islands, but that it is also an issue of mutual 
benefit. And we have to live up to our part of the bargain in a 
certain sense, in that we need to be able to understand what is 
actually happening within the islands, and what is important, 
and the role that China is playing, whether it is from Belts 
and Roads to interfering with elections.
    And those issues around interfering with the elections are 
stuff that we see here, as well, right? But it is unusual and 
different, and we need to have a perspective that is tied to 
the uniqueness of the islands. So, I want to touch base on a 
few of the points that were raised.
    Both Ms. Paskal and Dr. Friberg, you raised issues with 
regards to the issue of the climate crisis, and the issues that 
there isn't FEMA authority, and what do we do with emergencies. 
And if we do not pay attention to that crucial piece, that is a 
threat. That is a threat to everybody, but the islands are most 
susceptible.
    Could each of you talk a bit about what we should be doing 
different, and what that would mean in terms of how the people 
on the ground feel about it in each of these places?
    Mr. Friberg. Thank you for that question. I have a few 
comments about this in the written statement, but let me just 
sort of discuss the climate issue a little bit, because I think 
for the three COFA nations, they do view this as one of their 
major security issues, is their survivability and the ability 
of their fisheries to succeed and to be able to have fresh 
water and access to land for farming, et cetera.
    One of the ways, for example, I proposed that if DoD 
restores the Civic Action Team, their functionality can be 
partly to support infrastructure, which is sort of pro-climate 
remediation and adaptation, as well as supporting DoD's efforts 
to have agile deployment, for example. So, this may be work at 
ports, sea walls, other kinds of infrastructure, but this is an 
area I think that is of really great interest to the COFA 
nations.
    I think the other thing is that the FEMA funding for USAID 
activities in Micronesia and the Marshall Islands will end at 
the end of this Fiscal Year. So, they would revert to being 
able to be recipients of USAID traditional assistance around 
the world, but not sort of the substantial assistance that 
comes from a FEMA engagement. So, that again, is one of the 
things which is really on the table at this point with the 
expiration of economic assistance under the compacts.
    I will turn to my colleague.
    Ms. Paskal. It is still one of the things that is top of 
mind for many of the people, I know the compact states a little 
bit better than the territories.
    And it goes to this bigger issue of, they mostly don't want 
to just wait for us to come and save them, right? So, giving 
them the tools to be able to protect themselves and to be a 
part of the decision-making process. There are proposals, for 
example, for think tanks to be developed, so that you don't 
have these climate experts who fly in and then tell them you 
need this, or you need that. And in many cases, land issues are 
extremely complex in the islands, and the locals know it much 
better than anybody else. So, working with local knowledge in 
the areas is essential.
    But similarly, in terms of civil defense, there is a lot of 
retired U.S. military personnel. As was referenced, they serve 
in the U.S. military at rates that are higher than almost any 
U.S. state, as far as I know, and then they go back home. So, 
they have the ability to coordinate and to respond well in 
times of crisis, but they don't have the infrastructure to loop 
them together so that they can, they are out in the villages, 
so those sort of just linking mechanisms that give them the 
tools to solve their own problems in a way that works for them 
currently is missing.
    I think there is a piece of legislation that is going to be 
proposed that may help with that, and I think that that, with 
HADR, but with many other areas would be extremely important.
    Ms. Leger Fernandez. Thank you very much. My time is 
expired. But we might send out some additional questions 
because I think that the issues that you are raising, and the 
fact that we have an opportunity to get it right and not lose 
this opportunity, as many of your written testimonies pointed 
out that we have done in the past. Thank you very much. I yield 
back.
    Ms. Hageman. The Chair now recognizes Representative 
Radewagen.
    Mrs. Radewagen. Talofa lava, Madam Chair Hageman and 
Ranking Member Leger Fernandez. Thank you for this hearing, 
which comes just as we are waiting to see if the Administration 
finally signs and sends to Congress the COFA renewal 
agreements.
    I wish to begin my time with seeking unanimous consent to 
enter into the record President David Panuelo's letter that has 
been mentioned throughout the testimony.
    Congress will exercise its oversight and approval process 
of these agreements over the next year. And I hope we are not 
penny wise and pound foolish in funding them ASAP to counter 
Chinese influence in the Pacific. Protecting our national 
interests in American Samoa and the Pacific region has been 
among my main reasons for being in Congress, and this moment 
has been a long time coming.
    I especially want to echo Ms. Paskal's comments on moving 
away from maritime domain awareness to maritime domain 
enforcement, which is why I have long been an advocate for 
additional Coast Guard assets to be present in the South 
Pacific.
    One example of how we change and manage U.S. engagement in 
the Pacific relates to the strategic, economic, and commercial 
issue of protecting American fisheries industry and rights in 
the region, particularly our tuna industry. I couldn't agree 
more with the testimony of Dr. Peter Watson, that the economy, 
future, and fate of American Samoa and the U.S. purse seine 
fleet are inextricably linked to one another.
    In fact, I appreciate Dr. Watson's appearance. He has a 
distinguished career in the Asia-Pacific region, but an 
especially long history with the Pacific Islands, and was the 
White House lead staff member on President George H.W. Bush's 
team in organizing the very first Pacific Island Leaders' 
Summit. I was grateful to be invited to participate in that 
summit in 1990. He also arranged for five heads of government, 
as I recall, to have visits with the President, which I believe 
is a record.
    So, Dr. Watson, my dear Dr. Watson, I would like to ask you 
how current or future proposals to further limit commercial 
fishing activities in outlying areas within the U.S. EEZ might 
negatively impact the Pacific territories, particularly 
American Samoa, if further fishing restrictions are imposed on 
the American fleet.
    Mr. Watson. Thank you very much for those warm comments, 
Congresswoman. I am very concerned about the degradation of 
U.S. tuna fishing capabilities, and as it particularly affects 
American Samoa.
    The fact is that the United States is a member of the 
Western and Central Pacific Fisheries Commission, a treaty-
based organization that manages the international fisheries 
throughout the region. The WCPFC conservation measure for 
tropical tunas establishes a limit for the U.S. fleet of 1,270 
fishing days on the high seas, and a separate limit of 558 days 
for the U.S. Economic Exclusive Zone, or EEZ.
    Historically, the United States has informed the WCPFC that 
it will implement these two limits as a single combined limit 
of 1,828 fishing days, which can be fished by the fleet on the 
high seas in the U.S. EEZ. With most of the EEZ, however, 
closed for fishing, most of this effort has been fished on the 
high seas. Because some of the WCPFC members have complained 
about this, NOAA has gotten weak-kneed, and is proposing to 
split the single combined limit into two separate limits.
    I am sure all can see the irony in the government saying, 
``We are going to take your 558 days and no longer allow them 
to be fished on the high seas, but only in the U.S. EEZ. And 
oh, by the way, we are closing the remaining waters of the U.S. 
EEZ, sorry.''
    This is unacceptable. The purse seine fleets that are 
operating in and around American Samoa are a strategic asset, 
as well as, of course, an important driver of income within 
American Samoa.
    I would like to come back to this point, if I could, if 
there is additional time.
    Mrs. Radewagen. I think I am out of time now, aren't I?
    Ms. Hageman. Thank you. Yes, and the Chair now recognizes 
Mr. Sablan for 5 minutes for questions.
    Mr. Sablan. Thank you, Madam Chair, and good afternoon and 
welcome to our witnesses.
    It is nice to see you again, Dr. Friberg. I am sorry we 
missed our lunch date in Palau, but thank you for taking care 
of Brian and Ken. I appreciate that.
    Mr. Gray, I usually don't do this, but I will make an 
exception here, sir, special day. But I want to clear up some 
misconceptions about birth tourism, please, that you raised in 
your testimony, because you are giving my district, we already 
have a little black eye, a bit of a bigger black eye. You state 
that, ``In recent years, foreign birth in the Marianas have 
exceeded native ones,'' correct?
    Mr. Gray. That was the information that I had been given 
during my service at the White House.
    Mr. Sablan. OK, but wow, because here it is 2023. I do not 
seem to get what you mean by recent years.
    But, in fact, foreign births in the Marianas have not 
exceeded resident births since 2018. And even before the 
pandemic, tourist births were going down. And last year, only 
three tourists gave birth in the Marianas: two from China, one 
from Korea, South Korea.
    Madam Chair, I ask that this report of live births by 
mother and by mother's resident status from the vital 
statistics office of the Commonwealth Healthcare Corporation be 
added to the record, please.
    Ms. Hageman. Without objection, so ordered.
    Mr. Sablan. Thank you, Madam Chair.
    And Madam Chair, for context, may I also add to the record 
this report by the Center for Immigration Studies on birth 
tourism in the United States as a whole? There may be 26,000 
birth tourists annually, the Center says, and they enter our 
country under a tourist visa.
    I think it is important for Members to understand the 
Marianas is not the source of birth tourism problem. The report 
of live births in the Marianas does indeed reveal a deep 
problem, a real problem. However, the huge drop in births among 
U.S. population. In 2010, there were 670 births to residents of 
the Marianas. In 2022, that number was down to 380 births, a 42 
percent decline in births. That decline in birth rate mirrors 
the overall population decline in the Marianas, as measured by 
our decennial census. We lost 12.2 percent of our population in 
that 10-year period, the second-largest decrease of any U.S. 
state or territory.
    And that population drop is why I introduced the Marianas 
Population Stabilization Act, H.R. 560. And I hope, Madam 
Chair, the Subcommittee will act on my legislation to shore up 
the larger U.S. position in the Western Pacific.
    Mr. Gray, you were with the White House national security 
staff during the Trump administration?
    Mr. Gray. I was.
    Mr. Sablan. And you share my concern, and I am sure the 
concern of other members of this Committee, about the expanding 
influence of China in the Western Pacific. Yes?
    Mr. Gray. Absolutely.
    Mr. Sablan. I agree with you, sir. Yet, I don't think it 
strengthens America's position in the region if our population 
there is shrinking.
    People usually move away from their homes when they see 
better opportunities elsewhere. People move to improve their 
quality of life, to get a better education for their children, 
for better infrastructure, to earn more money. I can't stop 
them from moving.
    So, as a national security expert, Mr. Gray, you would 
agree it hurts America's position in the Western Pacific vis-a-
vis China if people are leaving the Marianas for a better life 
elsewhere. Wouldn't you say?
    Mr. Gray. Congressman, I think the most important thing, as 
far as my perspective on the Pacific, is that CNMI continue to 
have a strong social cohesion and to have an economy that can 
continue to sustain itself for years to come. That is my 
concern.
    Mr. Sablan. I am with that, sir. I cannot agree with you 
more. We are hurting now, really bad, and the Federal 
Government continues to take that back.
    We are a part of the United States, a permanent part of the 
United States, because we chose to be. Nobody forced us. By 
referendum, we chose to be. We are not other parts of the 
insular areas.
    And I must say, hearing all our witnesses, the smart ones 
too, let me say that none of the three COFA nations, the 
Federated States of Micronesia, who just, I understand, 
finalized agreements with the United States, and I am very 
happy for that; the Republic of the Marshall Islands; and the 
Republic of Palau, all these three island nations have the 
choice to negotiate with someone else, and yet they are here 
negotiating with us.
    And the very least we can do, again, Madam Chair, please, 
all of us, as Americans in our own better national interest, 
let's not wait another 10 years or 8 years, and we go over 
passport fees to fund this compact of impact associations. We 
have to get serious.
    And I am glad for Chairman Westerman's comments, that he is 
going to give this every priority. I thank all of you.
    My time is over, Madam Chair. I apologize and thank you.
    Ms. Hageman. Thank you. The Chair now recognizes Mr. 
LaMalfa for his 5 minutes of questioning.
    Mr. LaMalfa. Thank you, Madam Chair, my colleague.
    Mr. Gray, we referred to a RealClear Defense article and a 
quote you had made, that not since 1962 with the Cuban Missile 
Crisis, did a foreign power such as China pose such a direct 
military threat in close proximity to the U.S. mainland. That 
affects our various island partners, as well.
    So, how do we make the case to mainland Americans more 
strongly that they should care about this issue, as we do?
    And what real tangible threats is China's extremely 
aggressive presence in the South Pacific posing to our friends 
in the islands, as well as here in the United States, 
especially with our communications, et cetera?
    Mr. Gray. I appreciate that, Congressman. And to 
Congressman Sablan's point, I think that as much as a strategic 
issue, this is a moral issue. This is a question of Americans 
on the mainland and throughout the United States, we need to 
stand in solidarity with our nationals and our citizens, 
whether they live in CNMI, or Guam, or American Samoa as much 
as in Oklahoma, or Texas, or Florida. And I think there is a 
moral issue here.
    And then there is the strategic issue. And the strategic 
issue is, if you are trying to project American power, but just 
as important as project American power, if you are trying to 
deter Chinese projection of power farther into the Pacific, 
being able to deny access to these critical localities, that is 
essential.
    And I would point out, and this is something that was 
shared with me by a very senior Australian official when I was 
in government, if you superimpose a map of Imperial Japan's 
efforts to get military bases in 1940 over where the Chinese 
military has been publicly reported to be seeking bases, it is 
almost identical. So, you can see the historical pattern 
replaying itself because the geography is immutable, the 
geography hasn't changed.
    So, I think we need to be mindful that this isn't just a 
question of defense; this is a question of China's interest in 
playing offense, and we need to be very mindful of that.
    Mr. LaMalfa. But how much is that interfering with our 
ability here on the mainland just to do normal business?
    Mr. Gray. Well, it has a tremendous potential to interfere 
with everything from trade, commerce, supply chain issues. In a 
world in which China is projecting power well into the second 
island chain and beyond, that is not a world that is familiar 
to any American who has lived since 1945. We take for granted 
our ability to control the Western Pacific, to project power 
into East Asia. A world in which China is denying us that 
capability is a very, very different economic and geopolitical 
world.
    Mr. LaMalfa. Thank you.
    Mr. Grossman, with the Chinese Communist Party basically 
infringing on this economic zone and the maritime space in the 
area, how much is that affecting the fishing we have in that 
area and the overall economic activity for our partners down 
there?
    Mr. Grossman. Thank you for that question, Congressman. And 
as I mentioned in my remarks, as well as in my written 
statement, this is a pretty significant shift in the fishing 
throughout the Indo-Pacific and, frankly, globally.
    The South China Sea, which we haven't talked about as much 
here today, is practically devoid of fishing resources due to 
the destruction of coral reef environments in which the fish 
breed, pollution, over-fishing, and climate change, among other 
factors. So, Chinese IUU fleets, they are referred to as deep 
sea fleets, are kind of fanning out across the globe in search 
of new fishery resources to include within this second island 
area----
    Mr. LaMalfa. So, let's emphasize that there. What has the 
response been from international partners, U.N. or different 
groups, non-government organizations, to hit on this deliberate 
depletion, a very aggressive one by China, since they don't 
seem to follow any treaties or others on fishing appropriately, 
as many other countries do, what are you seeing as a response 
in the effort to hold China accountable?
    Mr. Grossman. Well, the United Nations certainly is 
tracking the issue. They meet on the issue in different, 
smaller committee settings.
    But, again, IUU, the very definition of it being illegal, 
unreported, and unregulated fishing, means that China is doing 
this stuff below board, essentially. So, the question is, how 
do you stop them from doing it?
    And one of the recommendations from my colleague, Mr. Gray, 
and you know, I share this sentiment, as well, is that we need 
to do more in terms of U.S. Coast Guard deployment to the 
region to patrol and monitor these activities.
    Mr. LaMalfa. And in our island areas, as well?
    Mr. Grossman. Yes.
    Mr. LaMalfa. Thank you, Madam Chair. I am sorry about the 
time, bouncing back and forth between committees.
    Ms. Hageman. Thank you.
    Mr. LaMalfa. I yield back.
    Ms. Hageman. The Chair now recognizes Congressman Case.
    Mr. Case. Thank you, Madam Chair. I hope we can all 
stipulate at this point that the PRC is actively, consciously, 
and very deliberately expanding its influence across not just 
the compact countries, but the entire Pacific, all of the 
jurisdictions of the Pacific, and that its intentions are not 
to foster an international rules-based order, or to enhance a 
free and open Indo-Pacific, or to support commonly-shared 
values, or any of the other ties that bind. So, great 
testimony, everybody. I think we are beyond that.
    And now, how do we deal with it? Mr. Friberg, and by the 
way, before I go on to Mr. Friberg, I just want to put a point 
on my colleague Mrs. Radewagen's reference to the letter from 
former Federated States of Micronesia President David Panuelo, 
I don't know if any of you actually did reference it, I think 
you did, but it deserves a little bit more attention, a 13-
page, highly itemized description of how China tries to subvert 
an entire government. If you want to find out what China is 
actually doing in the countries of the Pacific, and around the 
globe, for that matter, please read President Panuelo's letter, 
I recommend it to any of you. I think that settles the case in 
terms of strategy, and tactics, and approach.
    So, Mr. Friberg, first of all, great testimony. I loved 
your just nice, tight summary of what we are doing, why we are 
doing it, and what we need to do. I agreed with virtually 
everything you said, from defense, to economic, to immigration, 
and all of that is true.
    But you know as well as I do that there is an impact from 
the immigration side of the compacts to many jurisdictions in 
this country, with a particularly severe impact from the 
compact residents who are legally in our country but who are 
not getting the benefit of Federal services, not getting the 
benefit of impact assistance in any appreciable form, and that 
this is a critical obstacle to those jurisdictions supporting a 
renewed compact.
    I say this for myself, straight out: I support the 
compacts, I support their re-negotiation, I think they are 
critical to our national security. But I cannot accept the 
consequences to Hawaii or, for that matter, to Guam, to the 
CNMI, to Arkansas, to Washington, to Oregon, to California, to 
other jurisdictions of the obligation of hosting compact 
migrants with particular needs in economic, health care, social 
services, education, in some cases public safety.
    You used to work for the Government Accountability Office, 
and I think you said in your introduction you authored some 40 
reports on the compact countries over a span of 20 years. But 
you authored one that was particularly instructive, which was 
the report ``Populations in U.S. Areas Have Grown with Varying 
Reported Effects,'' which is essentially an analysis of compact 
impacts, resident impacts, unreimbursed resident impacts.
    And I would ask unanimous consent that this report be 
included in the record, Madam Chair.
    Ms. Hageman. Without objection, so ordered.
    Mr. Case. Thank you. I am going to cite your No. 1 
conclusion, at least the one that reaches out to me. The top 
three jurisdictions with large compact populations: Hawaii, 
Guam, and the CNMI, had $1.8 billion in compact impact 
consequence. In other words, the services provided to the 
compact residents between 2004 and 2018, I think it was, with 
$500 million reimbursed. That is not adequate reimbursement.
    So, what are the remaining steps to be taken to adequately 
compensate Hawaii and other jurisdictions for the impact of the 
migrants, and support the compacts in the process?
    Mr. Friberg. Thank you. That is a big question, and I would 
note that I don't really author GAO reports, I help a team that 
prepares them. So, I have many colleagues that are behind all 
of this good work.
    I would say, thinking about the compact impact, this was an 
issue which arose in the mid-1980s, when Congress first 
considered the first round of compacts. And the notion was that 
Congress told the Pacific jurisdictions: American Samoa, Guam, 
CNMI, and Hawaii, we didn't want there to be adverse effects on 
your jurisdictions.
    Beginning with the amended compacts in 2003, there was $30 
million a year for a 20-year appropriation and authorization as 
part of that package. Those funds do end this fiscal year. So, 
that has been the extent of sort of a permanent authorization 
to address compact impact in the Pacific.
    In addition, there have been some congressional 
appropriations of discretionary funds.
    The recent several-year-ago change in Medicaid eligibility 
was, I think, a significant improvement in the lives of the 
COFA migrants, but it also provided a Federal share of the cost 
of health care, which a lot of the states were picking up----
    Ms. Hageman. We will need you to wrap up, thank you.
    Mr. Friberg. Thank you. I will stop.
    Ms. Hageman. The Chair now recognizes Representative 
Gonzalez-Colon for 5 minutes of questioning.
    Mrs. Gonzalez-Colon. Thank you, Madam Chair. I am so happy 
that, actually, you are leading this hearing on such an 
important issue, not just for the United States, but for the 
whole region. All of us have traveled to many of the countries, 
and we have been seeing the Belt and Road Initiative, and we 
also saw many examples of what is happening, whatever the 
communist China is doing, investments or upgrades in 
infrastructure in countries like North Macedonia, African 
countries, and many others. So, this is not new.
    What is new here, is that the United States needs to engage 
with the Freely Associated Compacts that are going to expire 
now in 2023, and we are talking not just Palau in 2024, 
Micronesia Islands in 2023, and the Marshall Islands in 2023.
    I think what Chairman Westerman brought to the table, it is 
important in a bipartisan way that we should actually be 
looking forward to receive those negotiations and try to 
establish and continue to deter the malign influence of the 
communist China in the Pacific region. So, to that end, I do 
have questions to Mr. Grossman.
    U.S. analysts and officials have long expressed concern 
about a communist China investment in commercial seaports, 
airports, and other infrastructure projects around the world, 
and how those investments facilitate the expansion or 
establishment of a formal military presence in those areas. 
Similar concerns have also been raised with security agreements 
with the communist China to train and provide equipment to 
local law enforcement officials.
    Could you discuss how this is playing out with respect to 
the Indo-Pacific Region and its implications for U.S. security 
interests in the region?
    And that means how the Government of China is leveraging to 
support for infrastructure and security upgrades in Pacific 
Island countries to establish a permanent base and weaken U.S. 
partnerships in the region.
    And, of course, I know in your testimony you mentioned 
concerns surrounding the agreement with the Solomon Islands and 
the upgrades to their airstrip in Kiribati, which could be an 
air base for the Chinese influence. I will be happy to hear 
your comments on that.
    Mr. Grossman. Thank you, Congresswoman, a lot to unpack 
there.
    But very briefly, I will say that kind of the poster child 
for U.S. concerns about what China is doing in terms of BRI 
infrastructure to different countries is Sri Lanka. A number of 
years ago, China offered to build up the Port of Colombo in Sri 
Lanka. When the bill came due, Sri Lanka couldn't pay. And 
China said, ``Well, what else do you have for us?'' And it 
turns out China now operates out of Hambantota Port in the 
south of Sri Lanka on a 99-year lease. It is very rare that you 
see 99-year leases. But for China, this is pretty common 
practice.
    And the question is, what are their long-term ambitions 
there? Is it purely commercial, or is there something else?
    I will just make sure everyone understands that Hambantota 
is along sea lines of communication within the Indian Ocean, 
basically connecting Asia to the Middle East, and to Europe, 
and Africa. So, it is a pretty important corridor.
    But in the Pacific, we see similar types of activities. 
Right after the Solomon Islands switched recognition from 
Taiwan to China in 2019, we then had a New York Times expose 
about how China was trying to essentially forge a similar deal 
on one of the islands, Tulagi, in the Solomon Islands, a 75-
year lease for Tulagi. But once it became exposed, that deal 
essentially went away. So, yes, we have concerns about what 
they are trying to do through BRI.
    And on the policing issue, this is not the first time China 
has done this with Solomons. Fiji, you can go back to 2011, 
there was an agreement. But now the new government in Fiji is 
starting to reconsider whether that is a good idea because we 
are conveying to them you may not want to have an authoritarian 
regime essentially training your local law enforcement. That 
might not be a good idea if you want to maintain a democratic 
system.
    Mrs. Gonzalez-Colon. Thank you. And I know Mr. Gray 
proposed National Security Council-led interagency policy 
process, including director-level position focusing on U.S. 
territories.
    I know my time is going to expire, but I would love to know 
more about how we can make that happen, and help tackle those 
threats, and strengthen our efforts to counter communist China 
malign influence in the region.
    Mr. Gray. Yes, thank you, Congresswoman. I would just add 
to my written testimony and what I said earlier, that the way 
the National Security Council is structured now, there really 
isn't any focus specific to our territories. They are treated 
as an ancillary part of our Asia Directorate or, in the case of 
Puerto Rico and the Virgin Islands, our Western Hemisphere 
Directorate, the issues, obviously, are unique, the challenges 
are unique, the legal structure is unique.
    So, having personnel who are devoted to that issue 
specifically, and can work functionally across different issues 
and regions, I think that would allow this challenge to receive 
the bureaucratic attention that it needs, instead of being 
treated as an afterthought, which too often it is now.
    Mrs. Gonzalez-Colon. Thank you.
    Thank you, Madam Chair. I yield back.
    Ms. Hageman. Thank you. The Chair now recognizes Mr. Carl 
for 5 minutes of questions.
    Mr. Carl. Thank you, Madam Chair, and I am so sorry for 
jumping up and down, but nothing like having three committee 
meetings going at one time.
    Mr. Gray, I have a quick question for you. Thank you all 
for being here. The CCP concerns me. I have seen firsthand the 
impact of the CCP's use of soft power down in Central and South 
America. I have been doing some, for lack of better terms, 
research down there.
    The CCP is active in countries in our hemisphere, building 
everything from road and soccer stadiums. They are doing this 
in our backyard, and it deeply troubles me because they are 
trying to replace the U.S. influence in these areas. And I 
think that that goes without saying.
    I am worried similar things are happening in the Indo-
Pacific area. I believe it is incredibly important we must push 
back against the efforts of the CCP to spread its influence in 
the Indo-Pacific area, which is likely the location for the 
future armed conflict.
    Mr. Gray, can you talk to me a little bit about how the 
PRC's influence has spread across the Pacific Islands?
    Mr. Gray. Thanks, Congressman, and you are absolutely right 
that this is a Pacific issue, but it is a global issue, as 
well.
    The way in which the CCP took advantage of our kind of 
strategic distraction in the early 2000s and the 2010s, and 
they began a process of, you can look at it in kind of a multi-
front way.
    First there is infrastructure, like Mr. Grossman alluded 
to, BRI, going in and spending vast sums of money, often at 
usurious interest rates, to build projects that ostensibly 
these small developing states want. Too often, these projects 
end up being white elephants. They end up being infrastructure 
that doesn't work, or ends up leaving the country worse off 
than it was when it began.
    They do elite capture. They are very good at taking elites, 
Solomon Islands is a great example, wining and dining them in 
Beijing, giving them the attention that, frankly, they don't 
always get from the United States and our allies, and they do a 
very good job at prioritizing for influence and access the 
countries that they view as strategic.
    So, we have watched as Solomon Islands, Papua New Guinea, 
Vanuatu, the Freely Associated States, even to some extent the 
U.S. territories, where they view there to be a strategic 
interest, they have applied all of these tools of national 
power to exert influence, and it has been a steady 15-year 
process of moving across the Pacific and beginning to penetrate 
farther and farther past the second island chain.
    Mr. Carl. I have seen down in Panama, the canal, they did a 
project for the Panamanian Government down there and messed it 
up. We have the Corps of Engineers down there now trying to 
figure out how to fix it. So, it is not the best of quality, I 
might add, for future reference, the work that they actually 
do.
    Given the United States has three territories and 
international agreements with the Pacific Island countries that 
are so close to China, how can we use those relationships to 
push back against the CCP's influence in that region?
    Mr. Gray. Well, Congressman, I think that, first, U.S. 
territories and the Freely Associated States are, if you look 
at it in just strategic terms, they are extraordinary strategic 
assets for the United States that have to be continuously 
safeguarded and cultivated. We take them for granted at our 
peril.
    And from a strategic standpoint, having South Pacific 
projection in American Samoa, having projection as far into the 
Western Pacific as Palau through our compact there, those are 
incredibly significant for us.
    So, I would say, as a matter of policy, obviously, renewing 
the compacts is critical, but then elevating the resources and 
the attention that we give to our territories. Congresswoman 
Radewagen talked about our Coast Guard station in American 
Samoa. That is an easy way to project U.S. power farther into 
the South Pacific, combat Chinese illegal fisheries activity, 
and to penetrate farther into a subregion where China has been 
operating with almost impunity in some ways, and the United 
States has been very late to the game. With just a little 
investment of resources, we can do a tremendous amount to push 
back there.
    Mr. Carl. Thank you, Mr. Gray, and thank you again to the 
Committee for coming and speaking to us.
    Madam Chair.
    Ms. Hageman. Thank you. The Chair will now recognize Mr. 
Moylan for 5 minutes of questioning.
    Mr. Moylan. Thank you, Madam Chair. I want to continue on 
with the line of questioning from my Congressman here from 
Hawaii, in line with that there.
    We talked about the grant there, Mr. Friberg, about the 
grant assistance for Guam, CNMI, and Hawaii for us hosting the 
COFA migrants, which we are happy to do. But this grant amount 
for the last 20 years, we have had objections with that amount. 
This $30 million is shared amongst, right? And we have 
continuous conversation throughout these years to say this 
amount wasn't sufficient. And now we are seeing the Biden 
administration not even asking to include this in your 
testimony. It is ending, and it is not even going to be 
included.
    So, if we know it wasn't fair from the start, and now we 
are still going to have this going on, how does that help us? 
We want to help. Our resources are being used.
    But let me ask you a question. Would you see the benefits 
of legislation which intends to reauthorize and expand these 
grant assistance programs to those states and territories who 
continue to be COFA host communities?
    In other words, we put legislation out there. Tell us the 
benefits of how that can help the hosting nations. This goes to 
anyone who wants to start.
    Mr. Friberg?
    Mr. Friberg. OK, thank you for the question. And I could 
just sort of put a point on the relative magnitudes we are 
talking about.
    Like, in 2018, I think Hawaii was recording $183 million in 
compact cost and receiving roughly $15 million. Guam was 
recording $147 million per year and receiving probably around 
$13 million. And the remaining amount primarily went to the 
Mariana Islands, and a small amount went to American Samoa. 
That was a fixed amount. So, clearly, very small relative to 
the cost of educating, providing health care, the cost of 
public safety for these migrant populations.
    One thing that was true by the time we got to the 2019 time 
period, is about half of the COFA migrants at that point were 
on the mainland, very large communities in Arkansas, Washington 
State, Oregon, California, Texas, and, frankly, just scattered 
throughout the country. Roughly 100,000 people had migrated, 
and about half at that point were no longer in Pacific regional 
areas. So, I think it is a good question, and it is really a 
hard one, I think, to address about what is the compensation 
package.
    One thing I did suggest in my oral comments and in the 
written comments is that right now the compact migrants are not 
treated as well as people who are lawful, permanent residents 
or have green cards, and they simply have better access to some 
Federal programs. And having access to those programs would 
reduce some of the cost to some of the jurisdictions who are 
providing other social support to those households.
    And I think it is really about these COFA families. They 
are important parts of our American community. They are 
important economically, and it is really making this a 
relationship that reaches all the way from those communities 
back to the COFA nations, and that is my sort of thought of 
this.
    Maybe some of my other panel members have other ideas.
    Mr. Moylan. I appreciate that, but we are going to continue 
to receive the migrants coming on in, and now at this point 
without any grant at all. And the Biden administration didn't 
even at least request for Congress to consider that 
reimbursement, even though we have been shortchanged from the 
start. We love our sister nations. We want to help. They come, 
and they are going to continue to come, but now we need to help 
our hosting nations.
    Mr. Gray, can I have your comment on that, please?
    Mr. Gray. Congressman, I certainly don't pretend to be an 
expert on compact impact, like my some of my other colleagues, 
but I will say that if we are going to have these compacts, 
which are strategically vital, we have to have a formula in 
which the compact impact is mitigated in a way that allows us 
to continue, frankly, with the support that we need within the 
United States to continue those relationships. And if we don't 
have the funding formula correct for compact impact, it is 
going to, over time, I think, degrade the support for the 
strategic relationships.
    So, I completely agree with you that we have to find the 
way to mitigate those challenges.
    Mr. Moylan. Mr. Grossman, you got a couple of seconds, if 
you want.
    Mr. Grossman. Yes, I mean, I think it has been sufficiently 
covered.
    I guess the one thing I would add is that we also have to 
keep in mind that in future renewals, other issues will crop up 
in COFA re-negotiations, such as I think climate change was an 
issue this time, at least for Marshall Islands, perhaps for the 
others, as well. And then nuclear testing legacy. So, those are 
things that we have to be prepared to have an answer for in the 
future when dealing with----
    Mr. Moylan. OK. Thank you, sir.
    Madam Chair, thank you.
    Ms. Hageman. Thank you. The Chair will now recognize 
Chairman Westerman for 5 minutes of questioning.
    Mr. Westerman. Thank you, Madam Chair. And again, thank you 
to the witnesses.
    And as we have discussed already, I mentioned this in some 
of my opening remarks, the U.S. compacts with the FAS countries 
are a balance of extraordinary security and defense right and 
strategic stability secured for the United States, and 
extraordinary economic gains and stability for the Freely 
Associated States.
    Ms. Paskal, could a COFA model with less comprehensive or 
extensive economic and security cooperation be calibrated and 
applied elsewhere to enable maybe a soft bilateral and 
multilateral cooperation?
    Ms. Paskal. I think, if that offer was made, there would be 
several countries that would be interested. In fact, I know of 
at least one that was actively interested in it, and it is 
partially out of fear of what China is doing.
    And a lot of this discussion, as Congressman Case was 
saying, OK, what do we do now? But we know China is a problem, 
and a lot of this discussion has sort of implied that the 
countries are choosing between two systems, two kind of equal 
things, China and the United States. And if you have Chinese 
police trainers, they are the same basically as American or 
Australian police trainers. But they are fundamentally 
different.
    The Belt and Road Initiative exports a system, BRI can 
stand for bribery and repression initiative. What goes into 
those countries at the ground level is incredibly socially 
disruptive, and many of the countries in the region, for 
example, Nauru, are scared, and want to look for another model. 
Nauru recognizes Taiwan, Tuvalu recognizes Taiwan. They are 
doing so because of what was in the last two pages of President 
Panuelo's letter, in which he said, ``These are the problems we 
are having with China, that is why we want to recognize 
Taiwan.''
    And I think there is a big question about why FSM, the core 
part of the Freely Associated States, the big part in the 
middle, wasn't encouraged to recognize Taiwan. That gets right 
to the heart of what some of the U.S. opinions, especially, I 
would say, in State, toward the region is. And there is a very 
big divergence on the ground among how Defense interacts with 
the region and how State interacts with the region. And I think 
that is delivering a confused message.
    So, from a Defense Department perspective, I think there 
would be a lot of support for expanding compacts to other 
nations. State, I am not so sure. So, that is a discussion that 
maybe would be beneficial to have a little bit more 
highlighting on within the U.S. system.
    Mr. Westerman. But you see that as beneficial, 
strategically, for the United States to do that?
    Ms. Paskal. I think it would be incredibly helpful, and it 
would be a symbol like no other that the United States is 
serious about being in the Pacific.
    We will have President Biden going to Papua New Guinea on 
May 22. There will be a meeting of Pacific Island leaders 
there. That meeting was actually convened by India, and 
President Biden is kind of showing up and having the engagement 
there to show that there is interest in the region. That sort 
of thing is very helpful. But what would be more helpful is 
this sort of actual institutional engagement between the 
countries that can lead to pathways of interaction that is 
military, economic, social, political, creating this defensive 
barrier against the spreading of authoritarianism across the 
region and bolstering of freedom and democracy across the 
region.
    Mr. Westerman. Yes, it is pretty sobering to see what has 
resulted from places around the world where the Belt and Road 
Initiative has been applied.
    In your statement, you mentioned a letter from the former 
Micronesian President. What specifically does the letter 
highlight and that should be of concern?
    Ms. Paskal. It is a description of a complete subversion of 
sovereignty. He talks about not only bribery of specific 
individuals in his government, but just to give you one case 
study that he uses, what happened with Sinovac. The United 
States delivered enough of its own vaccines for the entire 
country, for the entire Micronesia. China was insistent that 
Sinovac be accepted. The president said no. Suddenly he found 
one of his ministers saying, ``Oh, you know what? We will 
accept it just for the Chinese citizens in the country,'' and 
then the next thing he knew it was being accepted for the 
entire country. It was a total bypassing of any sovereign 
decision-making by the president of a country if it went 
counter to PRC interests.
    The PRC also designated a citizen of FSM to represent the 
FSM at an international meeting with the PRC. It is a 
destruction of democracy and sovereignty on a scale that is 
incredibly hard to imagine, and we are seeing it happen all 
across the region.
    Mr. Westerman. Thank you. And I have more questions, but I 
don't have more time, so I am going to yield back my remaining 
10 seconds, Madam Chair.
    Ms. Hageman. Thank you, Mr. Chairman. We appreciate you 
coming here today to engage in what is an extremely important 
discussion.
    I listened with great interest, and I think that everybody 
does recognize the challenges associated with China, and the 
importance of these countries and islands in our South Pacific. 
So, it is something that we take very seriously. And the fact 
that Chairman Westerman came and engaged with us today, I 
think, is a sign of that.
    I want to thank the witnesses for your valuable testimony 
and the Members for your questions.
    I was just looking through some of the materials you have 
provided, and that definitely is going to be reading material 
that I will take home and spend more time studying, as this 
issue is going to be coming up over the next 6 to 8 months, and 
I hope that we also will have an opportunity to come and visit 
some of the islands as well, to get a firsthand understanding 
of the situation that we are dealing with in the South Pacific.
    The members of the Committee may have some additional 
questions for the witnesses, and we will ask you to respond to 
these in writing. Under Committee Rule 3, members of the 
Committee must submit questions to the Committee Clerk by 5 
p.m. on Friday, May 19, 2023. The hearing record will be held 
open for 10 business days for these responses.
    If there is no further business, and without objection, the 
Committee stands adjourned.

    [Whereupon, at 4:04 p.m., the Subcommittee was adjourned.]

            [ADDITIONAL MATERIALS SUBMITTED FOR THE RECORD]

Submission for the Record by Rep. Radewagen

                             The President

                            Palikir, Pohnpei

                     Federated States of Micronesia

                                                  March 9, 2023    

        T.H. Wesley W. Simina         T.H. Reed B. Oliver
        Speaker, FSM Congress         Governor, Pohnpei State 
                                      Government

        T.H. Marvin T. Yamaguchi      T.H. Alexander R. Narruhn
        Speaker, Pohnpei 
        Legislature                   Governor, Chuuk State Government

        T.H. Arno H. Kony             T.H. Lester Danny Mersai
        President, Chuuk House of 
        Senate                        Speaker, Chuuk House of 
                                      Representatives

        T.H. Charles Chieng           T.H. Nicholas Figirlaarwon
        Governor, Yap State 
        Government                    Speaker, Yap State Legislature

        T.H. Tulensa W. Palik         T.H. Semeon Phillip
        Governor, Kosrae State 
        Government                    Speaker, Kosrae State Legislature

    My Dearest Speaker Simina & Members of the 22nd FSM Congress, 
Governors of our FSM States, and Leadership of our FSM State 
Legislatures,

    At the outset, I bring you warmest greetings from your capital of 
this Paradise in Our Backyards, Palikir, the Federated States of 
Micronesia. I wish you all the greatest of health, and hope that my 
letter finds you well.
    Speaker Simina: as you know, prior to the election I spoke with you 
about preparing a letter to you in the interest of administrative 
transition. I write to you today to discuss a topic of significant 
importance to our country and under that framework of transition. Now 
that our elections have concluded, I have reflected that there will be 
a new administration to take the reins of leadership and continue the 
important work of taking actions today for our Nation's prosperity 
tomorrow. I have publicly committed toward a peaceful transition of 
power. That commitment remains firm and unshakeable, and I further 
commit through this letter a promise that, prior to the new 
administration taking power on May 11, 2023, I will write to you all on 
several matters of importance and within the purview of your Executive 
Branch.
    Many of these matters I will begin briefing you on will be domestic 
in nature, and will serve as briefings prior to our State & National 
Leadership Conference in April, 2023. By necessity, however, some of 
these matters will also be on foreign affairs and foreign policy--
inclusive, for example, of the FSM's current role as Chair of the 
Pacific Islands Conference of Leaders (which is comprised of twenty 
Pacific Island jurisdictions); as Chair of the Micronesian Presidents 
Summit (the political organ of all the five sovereign Micronesia 
Presidents); the status of the Micronesian Islands Forum (the political 
organ of four sovereign Micronesian countries, each FSM State, Guam, 
and the CNMI); the conclusion of negotiations on the Compact of Free 
Association; and more. It is on that latter-topic of our foreign 
affairs and foreign policy that I seek your kind attention today.
    Our foreign policy is often distilled into the following two 
points. The first--the FSM is a friend to all, and an enemy to none. 
The second--the FSM extends to all peoples and nations that which we 
seek: peace, friendship, cooperation, and love in our common humanity. 
Over the course of my administration, I have sought to uphold this 
foreign policy, which is elegant in its simplicity and inspirational in 
its decency.
    There is, however, a weakness--a vulnerability, if you will--in our 
foreign policy as described above, my dear Speaker and Leaders. Our 
foreign policy assumes that those we encounter have good intentions and 
mean us well, and that other countries are either friends we haven't 
yet met or friends we've established meaningful partnerships with. I 
should emphasize that, on the whole, this is the right attitude for us 
to take, as it is noble in heart. But it also presents an opening that, 
if not watched for, and if not managed, could allow the sovereignty 
that we jealously guard to chip away before our own eyes.
    I believe that our values are presently being used against us, as 
Micronesians, and against our national interest, by persons who would, 
and who do, seek to use us so as to achieve a larger objective of their 
own. The object of my letter, then, this briefing, is to describe what 
we are seeing and what we know; to show how what we know and what we 
are seeing is a problem for our country; and, then, to offer a proposal 
for our collective consideration.
    I would first like to begin by discussing what we are seeing in the 
context of our country, but to do so requires defining a couple of 
terms, as they are likely to be new to many of us. The terms are 
``Political Warfare'' and ``Grey Zone.''
    Political Warfare is the use of all means at a nation's command, 
short of war, to achieve its objectives. Political Warfare can include 
overt activity (e.g. political alliances, economic measures, public 
propaganda) and covert activity (e.g. secret support to friendly 
elements, bribery, psychological warfare, and blackmail), including 
cyber-attacks by taking advantage of any system vulnerabilities. Many 
of these activities operate in the ``Grey Zone.''
    Grey Zone activities are defined by being below the threshold for a 
nation to respond to with force, and are otherwise difficult to handle 
by ``normal'' means. Grey Zone activity is, collectively, a blurry set 
of activities that can be hard to distinguish from ``normal'' until it 
is too late, with an element of rule-breaking and with the aim of 
achieving a strategic objective. Grey Zone conflicts involve the 
purposeful pursuit of political objectives through carefully designed 
operations; a measured, possibly prolonged, movement toward these 
objectives (rather than seeking decisive results within a specific 
period); acting to remain below key escalatory thresholds so as to 
avoid war until the ``right time''; and the use of all the instruments 
of national power, particularly non-military and non-kinetic tools.
    Simply put, we are witnessing Political Warfare in our country. We 
are witnessing Grey Zone activity in our country. Over the course of my 
administration, the scope has increased, as has the depth, as has the 
gravity.
    I appreciate, my dear Speaker and Leaders, that these are 
astounding suggestions. They are precisely the sort of suggestions that 
require--demand, even--an explanation. I will now provide numerous 
examples of this but, before I do, it is worth taking this moment to 
emphasize an essential piece of information.
    It is a matter of intelligence, gleaned from the now public PRC 
whitepaper, that President Xi Jinping has instructed the People's 
Liberation Army to be prepared for an invasion of Taiwan by 2027. We do 
not know that the PRC will invade at that time, or any other time; but 
we do know that the PRC intends to be prepared for the invasion by that 
time. We further know that the FSM has a key role to play in either the 
prevention of such a conflict, or participation in allowing it to 
occur. It is on this basis that Political Warfare and Grey Zone 
activity occur within our borders; China is seeking to ensure that, in 
the event of a war in our Blue Pacific Continent between themselves and 
Taiwan, that the FSM is, at best, aligned with the PRC (China) instead 
of the United States, and, at worst, that the FSM chooses to 
``abstain'' altogether.
    Now that we have defined Political Warfare and Grey Zone activity, 
let's review examples of this as it occurs within the FSM.
    One example is with regards to the conduct of ``research vessel'' 
activity in our ocean territory and Exclusive Economic Zone. You may 
recall having heard about an alleged weather balloon over the United 
States of America earlier this year; while it is plausible the balloon 
did record some basic weather data, such as temperature and windspeed, 
it is known that the balloon was used for the conduct of espionage on 
U.S. territory, security installations, and assets. That same basic 
premise is what we have seen in the FSM, only on our seas instead of in 
our air, and with ships instead of balloons. The weather balloon in the 
United States was a disguise for espionage; research vessels in our 
ocean territory are likewise disguised to hide espionage. We are aware 
of PRC activity in our Exclusive Economic Zone whose purpose includes 
mapping our maritime territory for potential resources, and mapping our 
territory for submarine travel-paths. We are aware of PRC activity in 
our Exclusive Economic Zone whose purpose includes communicating with 
other PRC assets so as to help ensure that, in the event a missile--or 
group of missiles--ever needed to land a strike on the U.S. Territory 
of Guam that they would be successful in doing so. When we sent our own 
patrol boats to our own Exclusive Economic Zone to check on PRC 
research vessel activity, the PRC sent a warning for us to stay away.
    That is why I initiated a total moratorium on PRC research vessel 
activity in the FSM.
    One example is with regards to a proposed Memorandum of 
Understanding on ``Deepening the Blue Economy.'' Allegedly framed to 
support our mutual efforts in the work of Blue Prosperity Micronesia 
and the resulting Marine Spatial Plan for the FSM, the MOU as designed 
included a number of serious red flags. Amongst these red flags 
included that the FSM would open the door for the PRC to begin 
acquiring control over our Nation's fiber optic cables (i.e. our 
telecommunications infrastructure) as well as our ports. Both our fiber 
optic cables and our ports are strategic assets whose integrity is 
necessary for our continued sovereignty. To be clear: the entire reason 
the East Micronesia Cable Project, for example, is funded by the United 
States, Australia, and Japan, is because of the importance of secure 
telecommunications infrastructure free from potential compromise.
    I had advised our Cabinet that we would deny the Deepening the Blue 
Economy MOU in June 2022. The issue was brought up again by the PRC-
side, and in December 2022 I learned that we were mere hours from its 
signing. I put a halt to that MOU, and formalized, in writing, our 
permanent rejection of it. The evening that I relayed our rejection of 
the MOU, Ambassador Huang Zheng had his farewell dinner with Secretary 
Kandhi Elieisar. The Ambassador suggested to the Secretary that he 
ought to sign the MOU anyway, and that my knowing about it--in my 
capacity as Head of State and Head of Government--was not necessary. To 
say it again: the same Ambassador who relentlessly shouts that the PRC 
does not interfere in the governance of other countries was himself 
actively attempting to interfere in our country's governance, so as to 
accomplish his mandate beneficial to the PRC but not to the FSM. (It 
may not be surprising that the PRC Special Envoy, Qian Bo, pushed this 
MOU again during his recent visit to our country.)
    One example is with regards to the proposed replacement for 
Ambassador Huang, Mr. Wu Wei. Mr. Wu is the Deputy Director General for 
the Department of External Security Affairs at the Ministry of Foreign 
Affairs. While his curriculum vitae included this information, it 
failed to include any amplifying information--such as his duties in 
that capacity; his work experience in previous capacities; or his 
educational background, such as what university he went to and what he 
majored in. When pressed for such amplifying information, the PRC 
Embassy provided little, describing that Mr. Wu's focus was on 
terrorism. It was through our own investigatory work that we learned of 
Mr. Wu's work experience as it relates to the use of clandestine PRC 
police offices, i.e., secret police, seen in countries such as Canada 
and Australia.
    We understand that Mr. Wu would, upon his arrival, be given the 
mission of preparing the FSM to shift away from its partnerships with 
traditional allies such as the U.S., Japan, and Australia. We know that 
Mr. Wu would expand PRC security activity, awareness, and interest in 
the FSM. I know that one element of my duty as President is to protect 
our country, and so knowing that: our ultimate aim is, if possible, to 
prevent war; and, if impossible, to mitigate its impacts on our own 
country and on our own people. So, I declined the Ambassador-designate 
his position. I instructed the Department of Foreign Affairs to inform 
the PRC that we expect their Ambassador to focus on technical and 
economic cooperation, and no further than that. As of the time of this 
letter, the PRC has not responded--formally or informally--to that 
rejection, though they have spoken with some of our senior officials 
and elected leaders to note that they're simply awaiting the new 
President to take power so Mr. Wu can become the Ambassador of China to 
the FSM.
    A common theme that the next several examples include is that the 
word ``no'' is scarcely, if ever, taken as the final word. On 
approximately six occasions within six months, it has been brought to 
my attention that the PRC would like to utilize charter flights--
allegedly so as to bring in the necessary workers to complete various 
projects, such as the National Convention Center. On each occasion I 
have made it clear the answer is ``no''--it is essential, rather, that 
these workers arrive via international commercial carriers such as 
United Airlines. The response is often the same; getting to the FSM via 
United means that their workers require U.S. visas, and the paperwork 
to acquire them is allegedly laborious and time-consuming. Maybe that 
is true; but what is also true is that having persons arrive in our 
country via Guam or Hawaii gives each of us a layer of added 
protection. It is a matter of public information that the PRC has used 
prisoners and other forms of servant-labor in projects through 
ChinaAID; and it is further the case that the FSM is not equipped with 
the necessary detection and screening tools and capacity to discern if 
a particular incoming person is, say, truly an engineer, or someone 
else altogether.
    That itself isn't a small matter, either. You can imagine my 
surprise when I was followed this past July in Fiji during the Pacific 
Islands Forum by two Chinese men; my further surprise when it was 
determined that they worked for the Chinese Embassy in Suva; my even 
further surprise when it was discovered that one of them was a PLA 
intelligence officer; and my continued surprise when I learned that I 
had multiple Cabinet and staff who had met him before, and in the FSM. 
To be clear: I have had direct threats against my personal safety from 
PRC officials acting in an official capacity.
    Perhaps of even greater interest, when it comes to that question of 
who comes into our country and what do they want, is as it relates to 
China's new Special Envoy for the Pacific, Qian Bo. Ambassador Qian was 
formerly the Chinese Ambassador to Fiji--and by extension was the one 
responsible for authorizing the two Chinese to follow me in Suva, and 
to observe U.S. Vice President Kamala Harris' address at the Pacific 
Islands Forum despite their lack of accreditation to be in the room at 
the time. It is not a coincidence that China chose Ambassador Qian to 
be the Special Envoy, nor is it a coincidence that the FSM was the 
first country the Ambassador was chosen to visit. (Is it a coincidence 
that our own Executive Branch failed to provide me information in time 
so as to allow me to gestate on whether or not to approve the visit in 
the first place? We'll come back to this later in this briefing).
    Ambassador Qian also would have been present during the 2nd China-
PICS Political Dialogue. That itself is noteworthy insofar as that was 
the public meeting where the FSM Government found itself represented 
not by myself or a Cabinet member or even a member of our Foreign 
Service--indeed, not by anyone in our Government at all but, rather, a 
private citizen named Mr. Duhlen Soumwei. I said to the PRC that we 
would not have formal representation at the meeting, and the PRC went 
to the extent of taking one of our citizens and then publicly having 
that citizen formally represent us. To say it again: China has 
established a precedent of taking our private citizens in multilateral 
meetings to formally represent our country without our Government's 
awareness or approval thereof.
    If the above is shocking or concerning, bear with me as I provide 
another example. In October 2021 the FSM joined the first China-PICS 
Foreign Ministers Meeting. It was clear from the outset that something 
was awry; I noticed, for example, that the draft remarks for our 
Secretary's delivery included frequent requests and references to 
proposals that nobody in our country had discussed beforehand. For 
example, it was suggested that the Secretary request a Free Trade 
Agreement with China. A Free Trade Agreement, on its face, isn't 
necessarily a bad idea (nor a good idea); but it certainly wasn't 
something that we had discussed internally in any form or fashion. I 
instructed that our remarks focus on asking China to work with the 
United States in combatting Climate Change.
    Toward the conclusion of the first China-PICS Foreign Ministers 
Meeting, it became clear that the proposed Joint Communique was laced 
with several problematic layers of statements that we as, as nation, 
had not agreed to. For example, there were references toward 
establishing a multitude of offices that our Government wasn't aware 
of, some of which could seem benign or harmless (such as the Disaster-
Risk Reduction Cooperation Center, which opened this February 22, 
2023--and whose formal functions continue to elude me despite the FSM 
flag flying at the opening ceremonies). Regardless, the FSM requested 
that countries receive more time to review the Joint Communique before 
it went out. We were not alone in this, I should add--former Prime 
Minister Josaia Voreqe Bainimarama of Fiji said the same, as did 
Premier Dalton Tagelagi of Niue. Instead, however, our requests were 
unheeded, and China immediately published the Joint Communique 
inclusive of remarks, which were false, that the FSM and the other 
Pacific Island Countries had agreed to it, which, in our case, we 
hadn't; and that first China-PICS Foreign Ministers Meeting was of 
course later cited to be the foundation for the second China-PICS 
Foreign Ministers Meeting. That theme continues: the FSM says ``no'', 
and our sovereignty is disrespected with the PRC saying we have 
achieved a consensus when we have not.
    I should emphasize that instances of Political Warfare and Grey 
Zone activity in the FSM need not be focused strictly on the most 
exciting geopolitical affairs. Malign or harmful influence can also be, 
and often is, banal, i.e., boring and unexciting. While I would be 
foolish to not explicitly recall China's suggestions in February 2020 
that the novel coronavirus wasn't dangerous and so the FSM should open 
its borders to Chinese citizens and workers, including the frequent 
calls to my personal phone number from Ambassador Huang at the time, 
the example I wish to cite now is regarding COVID-19 vaccines.
    You will recall that it was January 31, 2020, when the FSM refused 
entry to any person coming from a country that had one or more positive 
cases of COVID-19 (then described as the novel coronavirus) and that, 
for practical purposes, we referenced Guam and Hawaii as being separate 
from the rest of the United States. We closed our borders because we 
had good intelligence indicating a temporary, yet striking, societal 
collapse, inclusive of massive amounts of human suffering. The panacea 
or cure we needed was the COVID-19 vaccine.
    The FSM received its first doses of COVID-19 vaccines in December 
2020 (even prior to the U.S. State of Hawaii, in fact), and we received 
more than enough vaccine for every person in the country. Scientific 
evidence suggested that the Moderna and Pfizer vaccines were superior 
to all others, followed by the Johnson & Johnson vaccine. The various 
Chinese vaccines e.g. Sinopharm and Sinovac were, by contrast, not 
particularly effective in comparison. Considering that our country 
already had arguably the healthiest supply of vaccines of any 
jurisdiction in the world; that the vaccines we possessed were the most 
effective available; and the danger that community spread still posed 
to our communities at the time; the FSM National Government chose to 
only allow our citizens to use those three vaccines. It was a medical 
decision, based on science and with the intent of protecting our 
population. That wasn't good enough for China.
    China was on a quest for countries around the world to approve its 
vaccines, even though they weren't particularly effective. In the FSM's 
context, we explicitly told them about a half a dozen times--or, at 
least, that would be how many times I instructed my Cabinet to relay 
such instructions--and, yet, the issue kept appearing in COVID-19 Task 
Force meetings.
    On October 14, 2021, I relayed the final instruction that the FSM 
will not accept the Chinese vaccines. ``Let's be clear,'' I said, 
``Foreign Affairs will prepare a letter to say `no' to the China 
vaccines. Our answer should be very clear that, while we appreciate the 
offer, the answer is no because we have more than enough vaccines.'' In 
November, 2021--after the Secretary of Health and the Secretary of 
Foreign Affairs and myself had changed cellphone numbers due to 
incessant calls from Ambassador Huang--the FSM signed an agreement that 
we accept the Chinese vaccines. We included various stipulations, such 
as that they were to be used only for citizens of China in the FSM; but 
that wasn't what China wanted. What China wanted was for the FSM to be 
on the list of countries they could publicly promote as having accepted 
their vaccines. China got exactly what it wanted.
    Another example is in December 2021. During approximately the same 
timeframe that the Western & Central Pacific Fisheries Commission (i.e. 
the Tuna Commission) was having its annual meetings, China invited 
Pacific Island Countries to join a virtual meeting to come up with an 
outcomes document called the Guangzhou Consensus. At the Tuna 
Commission meetings, China was noteworthy for being the principal actor 
in rejecting a consensus from being reached on a core issue: should 
vessels that engage in illegal fishing be forever identified as IUU 
vessels? China's suggestion was ``no''--no they shouldn't be. But one 
of the key outcomes of the Guangzhou Consensus (which itself was a 
successor to the first China-PICS Foreign Ministers Meeting whose 
outcome documents our country didn't approve before publication) is 
that China would work with the Tuna Commission to tackle IUU fishing. 
This is in addition, of course, to the ``establishment of an 
intergovernmental multilateral fisheries consultation mechanism as a 
supplement to the existing mechanism.''
    I can recall, at the time, the advice of our Cabinet. ``The 
agreement is sufficiently broad and vague,'' they said; ``the agreement 
is not legally binding,'' they said. But with China, to be broad and to 
be vague is a threat--not a success. And just because something is not 
technically legally binding doesn't mean you won't find yourself 
beholden to it. One must merely look at Djibouti, which thought itself 
the recipient of a new port that quickly became a PLA Navy base; 
Zambia, which has seen China take ownership of its public utility 
systems; Uganda, which has seen China take ownership of its only 
airport--for both commercial and military uses; Ethiopia, which has 
seen China take ownership of its mass transportation system; Sri Lanka, 
which has seen China take ownership of its key ports. If these 
locations seem so foreign to us, I'll remind you that they too began 
with documentation very similar to the Deepening the Blue Economy MOU I 
rejected in December 2022. We maintain our sovereignty, so far, out of 
vigilance--not for any other reason.
    That's one of the many reasons I rejected the Common Development 
Vision, which was the core outcomes document of the 2nd China-PICS 
Foreign Ministers Meeting. I have already written extensively on that 
document to our brothers and sisters in the Pacific Islands Forum. 
While I attach to this briefing a copy of that letter for your 
information, some of the core concepts included China wanting to 
possess ownership of our ocean resources, and to create a Marine 
Spatial Plan for its own uses such as for deep-sea mining; control of 
our fiber optic cables and other telecommunications infrastructure, 
which would allow them to read our emails and listen to our phone-
calls; to possess ownership of our immigration and border control 
processes, for the use of biodata collection and observation; and to 
create sweeping security agreements with our country and our region.
    All of this, taken together, is part of how China intends to form a 
``new type of international relations'' with itself as the hegemonic 
power and the current rules-based international order as a forgotten 
relic. That's a direct quote, I should emphasize--a ``new type of 
international relations''--and an explicit goal on behalf of China from 
the Common Development Vision.
    By this point, my dear Speaker and Leaders, I can only imagine that 
I have provided enough examples to demonstrate my core message for my 
first main idea: the FSM is an unwilling target of PRC-sponsored 
Political Warfare and Grey Zone activity.
    Those who desire more examples, and more detail, are invited to 
reach out to me; we will schedule a briefing. In my love and 
unquestionable patriotism for the Federated States of Micronesia, I 
have made it a point to ensure that no stone is unturned in ensuring 
that the Office of the President is provided with reliable and complete 
information, and that I receive information from as many credible 
sources as possible. That includes, my dear Speaker and Leaders, our 
Nation's own Information & Intelligence Service (IIS), which I created 
by Executive Order, and which I intend, and hence recommend, that we 
institutionalize beyond my administration through appropriate 
legislation. Awareness of this Service's existence is provided as 
information to other Leaders, and extensive discussion on how it can be 
useful for the next administration is, I hope, a topic of discussion 
between myself and the four At-Large Senators-Elect who are equally 
eligible to become the next President and Vice President.

    Now let us discuss more why Political Warfare is a problem for our 
country.

    One of the reasons that China's Political Warfare is successful in 
so many arenas is that we are bribed to be complicit, and bribed to be 
silent. That's a heavy word, but it is an accurate description 
regardless. What else do you call it when an elected official is given 
an envelope filled with money after a meal at the PRC Embassy or after 
an inauguration? What else do you call it when a senior official is 
discretely given a smartphone after visiting Beijing? What else do you 
call it when a senior official explicitly asks Chinese diplomats for 
televisions and other ``gifts''? What else do you call it when an 
elected official receives a container filled with plants and other 
items? What else do you call it when an elected official receives a 
check for a public project that our National Treasury has no record of 
and no means of accounting for?
    This isn't rare. This happens all the time, and to most of us--not 
just some of us. It is at this point that I relay, simply as a point of 
information, that 39 out of 50 Members of Parliament in Solomon Islands 
received payments from China prior to their vote on postponing 
elections that were otherwise scheduled for this year. Have you 
personally received a bribe from the PRC? If the answer is ``no'', you 
are in the minority. That is why I am submitting proposed legislation 
on money laundering, disclosure, and integrity requirements for 
Congress' review, and also why I encourage passage of many floating 
legislation including the Freedom of Information Act.
    You likely would ask for, and certainly deserve, a concise example 
of bribery--or attempted bribery. Shortly after Vice President Palik 
took office in his former capacity as a Senator, he was invited to the 
Chinese Embassy for a dinner with other Members of Congress. The Vice 
President was asked by Ambassador Huang if he could sit up front, with 
other Senators, and also to accept an envelope filled with money; Vice 
President Palik refused, telling the Ambassador to never offer him a 
bribe again, and upon doing so was advised by Ambassador Huang 
something close to the effect of ``You could be President someday'' as 
the rationale for the special treatment.
    This past October 2022, when Vice President Palik visited Kosrae, 
he was received by our friends at Da Yang Seafoods. Our friends at Da 
Yang have a private plane, and they arrived in Kosrae (along with 
several senior FSM Government officials) on that private plane. Our 
friends told the Vice President that they can provide him private and 
personal transportation to anywhere he likes at any time, even Hawaii, 
for example; he need only ask.
    In our context in the FSM, with the Vice President's story as the 
singular exception, I will refuse to name names, but it is not out of 
courtesy; it is to keep the emphasis on the problem, and what the 
problem is, and how the problem festers, instead of naming or shaming 
any particular person or group of people. Senior officials and elected 
officials across the whole of our National and State Governments 
receive offers of gifts as a means to curry favor. The practical impact 
of this is that some senior officials and elected officials take 
actions that are contrary to the FSM's national interest, but are 
consistent with the PRC's national interest.
    I want to be clear that I am professing to you--those who will 
succeed my administration, and likely continue to remain in political 
power at the National or State level--that if your administration is 
like mine, you will have Cabinet who record bilateral meetings and 
transmit those recordings to China. You will have Cabinet and/or senior 
officials tell the Chinese Ambassador ``I will help you if you help 
me'' behind your back. You will have Cabinet accept gifts, such as 
envelopes filled with money, and alcohol. You will have Cabinet attend 
meetings with foreign officials--sometimes officials from countries the 
FSM doesn't recognize, or doesn't recognize yet--without your 
knowledge. It isn't going to be just one of them, and what one will 
tell you in public versus what they will tell you in private--or behind 
your back--may prove to be very different things. It is here that I 
wish to emphasize that not all of the political appointees I have been 
recently removing from office have engaged in these activities.
    So, what does it really look like when so much of our Government's 
senior officials and elected officials choose to advance their own 
personal interests in lieu of the national interest? After all, it is 
not a coincidence that the common thread behind the Chuuk State 
secession movement, the Pohnpei Political Status Commission and, a to 
lesser extent, the Yap independence movement, include money from the 
PRC and whispers of PRC support. (That doesn't mean that persons 
yearning for secession are beholden to China, of course--but, rather, 
that Chinese support has a habit of following those who would support 
such secession).
    At best, it means I find out about a visit by the man (Ambassador 
Qian Bo) who would have instructed staff to follow me at the Pacific 
Islands Forum in Suva less than 48 hours before its occurrence, despite 
our Government having to know about it, and prepare for it, weeks 
prior, and only for the man to advocate for initiatives I've rejected 
(i.e. the Deepening the Blue Economy MOU) and to call such rejections a 
totally agreed-upon consensus (i.e. the 2nd China-PICS Foreign 
Ministers Meeting). At worst in the short-term, it means we sell our 
country and our sovereignty for temporary personal benefit. At worst in 
the long-term, it means we are, ourselves, active participants in 
allowing a possible war to occur in our region, and very likely our own 
islands and our neighbors on Guam and Hawaii, where we ourselves will 
be indirectly responsible for the Micronesian lives lost. After all, 
this isn't about the United States or Japan or Australia or any other 
country--but it must be about our own Micronesian citizens, and the 
fact that Guam by itself, and Hawaii by itself, each have Micronesian 
populations larger than Yap and Kosrae combined and, together, have a 
Micronesian population larger than Pohnpei. In other words: this is 
about upholding our duty to our FSM Constitution, to which we swear 
allegiance to, including our duty to protect the security and 
sovereignty of our own country and our own people.

    My dear Speaker & Leaders,

    Prior to giving my State of the Nation address, I can recall two of 
my Cabinet recommending that we don't explicitly point out our 
rejection of the Common Development Vision (though references to 
condemning Trump for his fascist insurrection, or severing relations 
with Russia for their invasion of Ukraine, were ``fine''). The reason 
they recommended against this was simple: ``We are asking for money 
from China.''
    I am tempted to say that if our national interest, if our 
sovereignty, and if our principles can be traded away for temporary 
amounts of silver and gold--then we have failed in our duty to our 
people. But it does raise a good point, an essential point in fact in 
our world of politics and governance: isn't money all that really 
matters?
    I don' t say this as a joke; I think it is a truth that I cannot 
ignore, that you cannot ignore, and that we collectively cannot ignore. 
Money is power. Money is freedom. Money is influence. (If money wasn't 
important to us, we wouldn't be seeing officials getting bribed in the 
first place.) I cannot think of any elected official, me included, who 
hasn't been perpetually concerned about money--including how our 
country can obtain it, and how our country can ensure it is used for 
our nation's benefit. I can scarcely think of elected officials who 
don't seek additional home ownership in places like Hawaii, Guam, and 
Portland, or operate multiple businesses; I am of course a businessman 
myself. Money matters, and if I am to make the argument that our 
country is the target of Political Warfare so as to prepare our country 
and region to align ourselves with China prior to their invasion of 
Taiwan, I must also make the argument that our country can obtain a 
better deal without China. (If an invasion of Taiwan seems unlikely, 
did we not feel the same about the invasion of Ukraine?--and in this 
case, we know about PRC's whitepaper to be ready to invade by 2027). I 
am clearly aware that I must make the argument not only in terms of 
preventing war and saving lives, but in terms of how we can fill the 
gap that would occur if we were to turn off the flow of money from 
China.
    And that--my dear Speaker and Leaders--is what I have done on our 
behalf, and for our collective discussion. In February 2023, I met with 
the Honorable Joseph Wu, Foreign Minister of Taiwan, to solicit from 
Taiwan what their potential assistance to the FSM could look like if we 
switched diplomatic relations to supporting them instead of China, and 
what benefits we can get if we don't switch relations formally but do 
explore initializing a Taipei Economic & Cultural Representative Office 
(TECRO).
    Let's begin with what we can do without diplomatic relations. This 
March, 2023, I've invited a team from the Taiwan International 
Development Cooperation Fund (ICDF) to conduct a technical mission in 
the FSM to determine, among other matters, how Taiwan can assist with 
agricultural programming, such as tackling food security issues and 
establishing food co-ops. We are exploring a Memorandum of 
Understanding between Taiwan and the FSM as it relates to medical 
referrals, wherein our citizens can receive a higher quality of care 
than other jurisdictions and for less cost. (This is the same setup 
that Palau and the Marshall Islands enjoy). We are also exploring job 
training and scholarships for our students, and also flights from 
Taiwan to Guam and the FSM. I relayed to Foreign Minister Wu that this 
is acceptable for the short and immediate term i.e. prior to the 
conclusion of my administration.
    Of course, at the top of any FSM official's agenda is the status of 
our sovereign FSM Trust Fund. I was transparent with Foreign Minister 
Wu; we project we need an injection of approximately $50,000,000 to 
meet our future needs. We can and will receive this, over a three-year 
period, if and when we establish diplomatic relations with Taiwan. 
Meanwhile, we would also receive an annual $15,000,000 assistance 
package which we could divide however we wish (meaning, by extension, 
we could also simply send this assistance directly to our FSM States 
like we do with assistance from the Compact of Free Association). This 
would have immediate and long-term impacts on State Governments' 
capacity to implement programming for their residents.
    Additionally, Taiwan assures me that they will simply ``pick-up'' 
any and all projects that China is currently undertaking. The National 
Convention Center in Palikir? Taiwan will finish it. The Kosrae State 
Government Complex and the Pohnpei State Government Complex? Taiwan 
will finish them (using Micronesian labor and Micronesian businesses, 
unlike China, inclusive of job training for our laborers). The gyms in 
Satowan and Udot? Taiwan will finish them--and so forth.
    All of this assistance, of course, would be on top of the greatly 
added layers of security and protection that come with our country 
distancing itself from the PRC, which has demonstrated a keen 
capability to undermine our sovereignty, rejects our values, and uses 
our elected and senior officials for their own purposes.
    To say it again, my Speaker and Leaders: We can play an essential 
role in preventing a war in our region; we can save the lives of our 
own Micronesian citizens; we can strengthen our sovereignty and 
independence; and we can do it while having our country at large 
benefit financially.

    My dear Speaker and Leaders,

    I love the Federated States of Micronesia, this nation, my nation, 
your nation, our nation, too much to not inform each of you about these 
important topics, and to warn you of the kinds of threats and 
opportunities that face us. I am acutely aware that informing you all 
of this presents risks to my personal safety; the safety of my family; 
and the safety of the staff I rely on to support me in this work. I 
inform you regardless of these risks, because the sovereignty of our 
nation, the prosperity of our nation, and the peace and stability of 
our nation, are more important. Indeed, they are the solemn duty of 
literally each and every single one of us who took the oath of office 
to protect our Constitution and our country.
    I appreciate that this first briefing is lengthy--but I trust that 
you've found its information essential, and its proposals worth our 
collective consideration. I look forward to our further discussions on 
this topic, and over the next two months I will prepare additional 
briefings for your digestion on other items of interest and importance 
to this beloved Paradise in Our Backyards, the Federated States of 
Micronesia.

    Thank you, and God Bless the Federated States of Micronesia.

            Sincerely,

                                          David W. Panuelo,
                                                          President

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