MAJURO — The Marshall Islands and U.S. State Department negotiators have initialed four agreements to continue U.S. services in this central Pacific nation ‘ including a new U.S. Postal Services pact.
Foreign Minister Gerald Zackios and U.S. negotiator Albert Short initialed the four agreements late last week, indicating basic approval, though they must still be formally approved by the Marshall Islands and U.S. governments. These “subsidiary” agreements are part of a Compact of Free Association, future funding provisions of which are currently under negotiation.
While negotiators the four subsidiary agreements, they were unable to agree on the text of the Compact funding section that will govern U.S. aid to the islands beginning in Oct. 2003.
Robert Muller, executive director of Compact negotiations for the Marshall Islands, said in Majuro Wednesday that this was largely because a detailed fiscal procedures agreement was only delivered to their delegation for review on the last day of their stay in Washington last Thursday.
Marshall Islands negotiators had been in Washington for about two weeks holding technical talks on both funding issues and U.S. services.
Muller said he’s optimistic that the two sides can reach an agreement soon, despite remaining differences on both annual base grants and trust fund contributions. “Having (Compact funding) wrapped up in the next two months is doable,” Muller said.
In a series of counter proposals, the U.S. is offering $33.9 million in base grants and $7 million in trust fund contributions annually for 20 years. The Marshall Islands is seeking $36.6 million in base grants and $12 million annually in trust fund contribution.
“There’s been no movement on the money issue,” Muller said. But negotiators are discussing various options involving inflation factors for future funding-–the U.S. wants inflation adjustment limited to just two-thirds of actual inflation as in the current Compact, while the Marshall Islands wants the new Compact funding indexed fully to inflation so future funding does not lose its value-–and discussing the base year for the start of the inflation factor.
The U.S. wants the base year to be fiscal year 2004, when the new Compact funding kicks in. But the Marshall Islands is arguing for 1999 as the base year, allowing for a five year accumulation of inflation adjustment as was the case with the first Compact.
“If we use the U.S. model of two thirds adjustment with 2004 as the base year, we’re looking at significant to alarming budget deficits starting in 2009,” Muller said.
In a statement issued Wednesday, Zackios said he was pleased with the overall progress evident in the talks with the U.S. “As in any negotiation, there are some issues that still need to be ironed out, but rest assured we are committed to the process, and to getting a package to Congress for consideration,” Zackios said.
The four subsidiary agreements initialed and their key points include:
• U.S. Postal Services: Rates will change from the current domestic level to “special cost related rates.” This change is to be phased in over a five year period, but is to start no sooner than 2006, Muller said. This provision allows the USPS to develop special rates for the Marshall Islands that do not necessarily have to follow standard international rates, Muller said.
• Civil Aviation, economic services and related programs through the Department of Transportation: The new agreement allows Air Marshall Islands the ability under appropriate circumstances to provide air services within Kwajalein Atoll, the missile testing range operated by the U.S. Army. Currently, U.S. contractors provide air service for base personnel who travel daily to different islands in the missile range atoll.
The agreements also changes the “cabotage” rights of foreign air carriers to transport passengers and cargo within the Marshall Islands’ domestic territory. Under the current Compact U.S. carriers have unlimited cabotage rights. In the new agreement, this is limited to Majuro and Kwajalein. If a U.S. carrier wants to fly from either of these two islands to another island in the Marshall Islands such as Bikini, it will have to apply, according to Muller.
• Civil Aviation, safety services and related programs through the Federal Aviation Administration: The new agreement allows the FAA to provide more services aimed at improving safety and to regular civil aviation in the Marshall Islands, Muller said.
• Civil and Humanitarian Assistance Program through the Department of Defense: This is a discretionary, “as needed” program, according to Muller, that can provide Defense Department teams to provide services ranging from health and education to basic infrastructure construction in remote areas. Services provided by U.S. military teams under this program are paid for by the Marshall Islands.
Muller said “it’s a useful and cost effective program to target remote areas.”
