The three archipelagoes, spanning the Pacific between Hawaii and the Philippines, were U.S.-administered trust territories for decades after World War II. As independent states, they have unique ties with Washington under the Compacts of Free Association (COFAs), and are known as the Freely Associated States. Under the COFAs, the three nations give the U.S. military operating rights in their land, waters and airspace, and the United States provides them economic support in 20-year agreements that were renewed last week. Not only are the Freely Associated States critical to U.S. interests, but Pacific Island nations, which number more than a dozen, tend to see Washington’s policies toward these three closest partners as a litmus test of its commitment to the region.

COFA funding expired in September for the Federated States of Micronesia and the Marshall Islands, while Palau also struggled with economic difficulties ahead of its funding expiration in 2024. In the intervening months, the three nations’ leaders increasingly questioned U.S. commitment and urged Washington to act. But the delay isn’t the only thing undermining bilateral ties. U.S.-China competition in the region has made Palau and the Federated States of Micronesia increasingly important to U.S. defense planning, leading some citizens to worry that their islands could become targets for China in a future conflict. Meanwhile, Washington’s relationship with the Marshall Islands remains strained by the legacy of U.S. nuclear testing.

China is pursuing its own goals in the Freely Associated States, which threaten to jeopardize these crucial U.S. partnerships. This has involved bribing leaders, attempting to weaken U.S. influence and undermining support for Taiwan, which Palau and the Marshall Islands recognize. To preserve these valuable relationships and forestall China’s growing influence, Washington needs to help the Freely Associated States tackle their many challenges while increasing high-level visits that reflect the countries’ strategic importance to the United States. A positive step is that last week’s decision to renew funding for the states also creates an interagency working group and an office in the State Department dedicated to relations with them.

Bilateral Rifts Remain

The funding delay was “pretty typical” of how Washington treats Pacific Island nations, according to Giff Johnson, editor of the Marshall Islands Journal, and may have caused long-term damage to Washington’s relationship with the Freely Associated States. Nor does COFA funding assuage the countries’ concerns about being taken for granted, or heal deeper bilateral rifts.

In late February, Marshall Islands President Hilda Heine said her country’s relationship with Washington was “gradually being destroyed” by the delay, forcing the government to draw on its trust fund for costs, from teachers’ and health workers’ salaries to school lunches. On March 1, sitting next to the U.S. chargé d’affaires at the 70th commemoration of Castle Bravo — the United States’ largest nuclear test in the Marshall Islands — Heine questioned whether the bilateral relationship had come to a “crossroads” and said that her country “has been a steadfast ally of the United States, but that should not be taken for granted.” Marshallese leaders don’t usually use such blunt rhetoric and it conveyed deep concern about the funding delay.

The word “crossroads” was telling. In 1946, Operation Crossroads was the United States’ first round of nuclear tests in the Marshall Islands. By 1958, 23 nuclear detonations had rendered Bikini Atoll, as well as nearby Rongelap, uninhabitable. Enewetak, the site of 44 tests, remains partly uninhabitable. The resulting displacement of Marshallese from their home islands, and their high rates of cancer and other illnesses from nuclear testing, make the nuclear legacy a longstanding, painful rift in the U.S.-Marshall Islands relationship.

Former Marshall Islands foreign minister Jack Ading warned last year that this “serious irritant…has the potential for being exploited by China.” A USIP team learned during a visit to the Marshall Islands that Chinese officials have been doing exactly that, raising the nuclear legacy as evidence that the United States is untrustworthy. Meanwhile, recent U.S. efforts to expand compensation to U.S. citizens harmed by nuclear tests are sure to create frustration in the Marshall Islands, which has repeatedly sought more compensation for nuclear testing from the United States. The U.S. government considers the matter closed, and disagreements over it delayed COFA negotiations in 2022 and 2023.

Palauan President Surangel Whipps Jr. has also questioned U.S. commitment, and COFA funding will not alleviate Palauans’ concerns about ties with the United States. A potential deployment of U.S. Patriot missiles in Palau, supported by Whipps, stirred debate last year about whether it would protect the country or make it a target for China in a future conflict. In December, Palau’s Senate wrote a resolution rejecting the deployment, catching some regional observers “by surprise.” It shouldn’t have. A U.S. radar installation aimed at monitoring China sparked similar debate, and in August, a lawsuit to halt it. Last week, Palau’s House of Delegates approved a resolution supporting a greater U.S. military presence, but the Senate appears unlikely to pass it. Palau will hold elections in November.

Concerns about a U.S. military presence resonate elsewhere in the Freely Associated States as the Department of Defense explores options in the Federated States of Micronesia. The U.S. military already has a longstanding presence in the Marshall Islands, where it maintains a missile defense test range. Pacific island countries’ firsthand experiences of World War II battles underlie their concerns about becoming caught amid U.S.-China rivalry.

Significant Challenges Ahead

The Freely Associated States are emblematic of challenges facing the whole region: accelerating climate change, stagnating economies, lagging development and a lack of health infrastructure, all precipitating outmigration. For the United States to be a preferred partner over China requires addressing these challenges.

The Marshall Islands has been hit this year by chronic power outages and extreme waves. With an average elevation of seven feet above sea level, it is severely threatened by climate change. It faces high rates of outmigration as citizens seek better education, jobs and health care in the United States. Despite high cancer rates, the Marshall Islands has no oncology center. Meanwhile, Marshallese are increasingly concerned that sea-level rise could erode a nuclear waste containment structure on Enewetak Atoll. (A 2020 Department of Energy report said that the sea around Enewetak is already so contaminated that leakage would be undetectable.) The U.S. Government Accountability Office reported in January that the United States needs to build trust with the Marshall Islands on the nuclear legacy.

The Federated States of Micronesia last week declared a state of emergency amid severe drought that is leaving thousands of people without food and water. Outmigration has so depleted government staffing that foreigners, particularly from the Philippines, sometimes fill vacant positions. The labor shortage also hurts the economy. Non-communicable diseases are common — more than a quarter of adults are diabetic — but health care is inaccessible for many. Flights to the United States and Asia for some treatments are cost-prohibitive. It is a similar story in Palau.

All three states also face challenges with maritime domain awareness and transnational crime. Australia and Japan have provided them with patrol boats, but the Freely Associated States can’t cover their vast economic zones, or even their territorial waters, and cannot adequately track the movements of Chinese research vessels or prevent illegal fishing. Often, their patrol boats are unused, lacking fuel and personnel. Palau, in particular, struggles to mitigate the presence of Chinese organized crime.

The COFA legislation includes long-sought provisions that have in the past fallen through the cracks. It restores federal benefits to citizens of the Freely Associated States living in the United States, after they lost access in the 1990s. It will finally provide health care to veterans from the Freely Associated States who serve in the U.S. military at a higher per capita rate than any U.S. state. Implementation will be vital, and more attention will be needed for challenges affecting the Freely Associated States’ citizens in the United States, such as deportations, which create financial and social challenges for people and families who have only known a life here.

The Freely Associated States will remain valuable to U.S. defense posture in the Pacific. Equally important is tending to the political relationships that underpin all cooperation and tackling each country’s systemic challenges. COFA funding alone will neither secure their favor nor resolve those challenges. There’s much work to do.