POHNPEI (Pacnews) — Representatives from the Federated States of Micronesia and the United States have met informally to discuss key elements of the Compact of Free Association funding extension counterproposal delivered to the FSM last month.
Following the fourth negotiating round in December, the U.S. drafted a discussion document for the technical working session. The session was designed to facilitate the free flow of information between the two sides toward an agreement to be initialed sometime this summer.
Upon conclusion of the session, both parties recognized that there are many outstanding details to be worked out in the remaining negotiating rounds.
The U.S. discussion document’s key elements included: an annual grant of $72 million declining by $1 million each year for 20 years; identification of priority sectors in health, education and infrastructure with additional sectors in private sector development, environment and capacity building; a 20-year time frame for grant funding; a trust fund account increasing by $1 million each year to replace grants after 20 years; endorsement of ongoing access to certain federal services and programs, continuation of current 2/3 inflation adjustments with a 5 percent cap; a joint economic management committee and mandatory annual appropriations by the U.S. Congress.
In December, the FSM presented its most recent proposal, including the following key elements that the U.S. discussion document countered: $79 million in stable annual grant assistance; $20 million in annual contributions to a trust fund to replace grants after 20 years; identification of grant sectors in health, education, infrastructure, environment, private sector development and capacity building; a 20-year time frame for grants; full adjustment for inflation; ongoing access to federal programs and services; a joint economic management mechanism with a full time joint management secretariat for Compact II implementation, and full faith and credit from the U.S. Congress to support annual grants for 20 years.
Regarding certain key U.S. elements, and after review and analysis by the Joint Committee on Compact Economic Negotiations and the Economic Management and Policy Analysis Team, Sen. Peter Christian, the FSM’s chief negotiator, informed the U.S. that the FSM was willing to accept the 2/3 inflation adjustment capped at 5 percent as a concession the FSM could live with. But the FSM could not support the proposal of annual $1 million “decrements” while increasing the trust fund amount by $1 million annually.
This is essentially a “step down” and would have the same effect by magnitude as the initial step-down in Compact I, that would create a powerful drag on the FSM economy both per capita and in private sector development.
Christian said “the FSM has given the proposal our dedicated attention and that our final numbers and guiding language must be adequate enough and clear enough to support progress and maintenance of the FSM’s effort to attain its economic and social goals. All of this is to prepare for the FSM, in the next 20 years, a more economically solid platform from which the Trust Fund will move.”
