In the second part of this series, KPRG sat down with Palau President Surangel Whipps Jr., to discuss how and why negotiations for the Compact of Free Association (COFA) agreements took longer than anticipated. The president explained that the delays were needed for Palauans to receive what they deserved.
TRANSCRIPT
HOST INTRO/JEFFERSON CRONIN: We are proud to present the second part of our exclusive interview with Palau President Surangel Whipps Jr. KPRG's Naina Rao sat down to discuss how and why negotiations for the Compact of Free Association agreements, or COFA, took longer than anticipated. But the president explained that the delays were needed for Palau to receive what they wanted.
NAINA RAO: The Compact of Free Association, also known as COFA, are international agreements establishing and governing the relationships between the United States and the freely associated states, or F-A-S. They’re comprised of the Republic of Marshall Islands, or R-M-I, the Federated States of Micronesia, or F-S-M, and Palau.
Under the COFA agreement, the U-S provides economic assistance to the F-A-S, for the next 20 years. It primarily covers financial and service elements for the countries, like education programs, support for U-S military veterans and the postal service.
In return, Washington gains exclusive defense and security access over a critical corridor that runs roughly between Hawai’i and Guam, on to Taiwan and U-S treaty allies Japan and the Philippines. The U-S is also obligated to protect the R-M-I, F-S-M and Palau from any attack or threat.
Today, in Palau, that looks like the current buildup of an over-the-horizon radar system by the U-S military.
But the journey to get here was excruciatingly delayed. After negotiations on the terms of COFA renewals between the U-S and the F-A-S concluded last year, Congress took months to approve funding for it. Long enough to go past the expiration date of these agreements with Micronesia and the Marshall Islands.
The problem was not that they were unimportant or that there were issues with the agreement – it had overwhelmingly bipartisan support from the House and the Senate. It’s that the COFA renewals reached Congress during one of its most dysfunctional periods in recent years.
CLIP 1: Well time is running out for Congress to prevent a government shutdown.
CLIP 2: Chaos on Capitol Hill today, brought on by the house vote to remove Kevin McCarthy as speaker.
CLIP 3: The White House is also asking for $37.7 billion to fund the war in Ukraine…
CLIP 4: At a time of huge trouble for global security, doing a defense authorization bill is more important than ever.
RAO: The waiting led to a letter written by the presidents of the F-A-S to Senate leadership in February of this year. The heads of state emphasized the need for legislation that would strengthen their associations in a timely manner, and enable them to endure.
If COFA wasn’t renewed for Palau, President Surangel Whipps Jr. told me that the island nation would have had to make cuts to pensions, borrow more money on top of mounting debt, leaving it even more vulnerable to internal instability and outside influence.
RAO: With the way the negotiations unraveled, and the delays, how are Palauan’s generally feeling about that? And how do you see that affect U.S.-Palau relations?
SURANGEL WHIPPS JR.: Well, just to give you a little bit of a history. 2010. There was an agreement that was signed between Palau and the United States. They had negotiated a new compact. But U.S. Congress couldn't pass a budget bill for eight years. It took till 2018 before it finally passed. Now fortunately, at that time, there was a budget number that Palau was getting every year from United States. It was about 13 million. Because of the continuing — Palau continued to get that 13 million a year. We didn't get the infrastructure money that was part of that deal. But at least those funds kept coming. But I would say, because it wasn't fully implemented, it definitely created doubt in the Palauan's mind, is this — is the U.S. really serious about this relationship? (Moving forward to 2020) The Trump administration and former president Remengesau's administration had already negotiated a deal with the United States. Basically 400 million over 20 years. And we have a trust fund, you won't be taking any more money from the trust fund, and letting that grow. And then at the end of 20 years, we're just gonna live off of that. Well, this is I think, the fundamental problem that we had with this agreement, there was always this notion that the U.S. rights would continue. They would continue to be using Palau, but then somehow the economic assistance would end. It was an unequal relationship. And so one of the things that when we got into office, one of the things we did immediately was tell the U.S. government that the deal that had been presented was really unacceptable, and would send Palau backwards. And as partners, we need to have an agreement that really is not just a win for the United States, but also a win for Palau. And as true partners, we need to work together. So the negotiations went on. But we refuse to go to the table because I said, we're not talking, first of all, unless you change your negotiator. We said, respect that we're equal partners. We may have 20,000 people, U.S. has 300 million. But we're still a country. And if I, as president, have appointed a special envoy, and a compact negotiator, I expect Biden to do the same.
RAO: With the help of allies and friends on Capitol Hill and the White House, President Biden appointed the first-ever US Presidential Envoy for compact negotiations in 2022. This dedicated diplomatic role for COFA amendments is currently held by Ambassador Joseph Yun.
WHIPPS: It was tough negotiations. Of course, we didn't get everything that we wanted. But the end perspective, we went from $400 million to $889 million, and in fact, still allowed to use a trust fund. So we actually have, versus $400 million that we would have used in the first 20 years, we can now use $1.2 billion to operate the government. So that's, that's a very big difference as to where we were. And under the new agreement, it says those funding will continue. And they're all adjusted for inflation every year. So they will continue to rise over time, which was one of the flaws in the original agreement. Really, it doesn't take us back to square one, we were able to ask the U.S. this aid, based on our challenges with COVID, the amount of debt that we've gotten into, help us get out of this, put us on the right path. So we're actually starting the compact a year early. This second round. I explain all of that, because you ask well, how's the peoples feeling about this agreement? I believe the people of Palau, yes, they would like to see more. But I think we are much better off than where we were. The people of Palau are very happy as to where we are. There are always people that are going to be complaining. But I think overall, tremendous win for Palau and a win for the United States and building that relationship. Now, the delay definitely created doubt. And in my letters and my communication with the United States, I kept on reminding them, that we approved — Palau approved this in May of 2023. Our goal was it should be implemented by October 1 of 2023, as the terms of the agreement. I said, let's not fumble this, because it was September and it was time for football. And I was in Washington. And of course, we went to a CR so we fumbled.
RAO: CR?
WHIPPS: Uh, continuing resolution. Right? So they didn't do anything to the budget. They just kept the same numbers. Well, if you keep the same, Palau doesn't get anything, right? After that, we said, oh, there's hope we're gonna get on the National Defense Authorization Act. We got sidelined off of that. And then there was the aid to Ukraine and, and Israel. So oh, we're excited, we're gonna get on that. And then it got sidelined. So all these things were happening. And I think it does create doubt in our people, this couldn't really happen. So we made one last push, wrote to the senators and the congressmen. And finally, I think Washington was able to come to a compromise. And that's why, at the end of February, you know, being in March, we got the call, that it was going to be passed, and President Biden finally signed it. But before that, people were gonna say, are we going to repeat what happened in 2010? People were beginning to doubt what I was saying, because I will tell them Washington sometimes is messy. But we have to trust the system. Democracy is not a dictatorship, where Biden just says pass it and get it done. They've got to fight over it. But at the end of the day, we believe that democracy will find the best solution and the best compromise. But there's no question that leading up to that point, it was definitely raising doubt, and anxiety that maybe we're gonna go down that path. It was late. But I would say just in time.
RAO: You know, you mentioned about equal. Being equal with U.S. Why do you think it took them this long to finally treat you as an equal partner?
WHIPPS: We're small, right? So, I think the U.S. sometimes thinks, or people that are in leadership in some of these agencies probably think 'they have no choice. They'll just do whatever we tell them.' Right? I'm not overly generalizing. But sometimes I think, some bureaucrats that have been there a long time, that's their thinking. In fact, that was the feedback that I got, when I said we're not talking to you anymore. But I think we were very consistent in our messaging, because once again, Micronesian islands are less populated, not as many people, but we earned our respect as individual nations. We all come to the table equally, and we should be respected. And I think, if anything, we've been consistent in our messaging the United States that these are the facts, we're going to tell you like it is. May be hard for you to hear. But hopefully, the truth will help us all make better decisions, more informed decisions, and ultimately, that's what makes families stronger. It's being honest and truthful to each other. And I think that's one of the things that, in dealing with the United States, we've been very upfront with them. And very clear. It's building those bridges, working together. Because ultimately, we know where we're located. The reason why the battle that happened in Palau was the way it was is because of our strategic location. There's no question how important that is for the security and defense of the United States. And because of that, we should be true partners and working together for a free and open Pacific and ensure that our people are also protected.
RAO: The $889 million.
WHIPPS: Yeah.
RAO: Is that enough?
WHIPPS: Well, like I said, it's it's never enough. But it's a lot more than where we were, right? But the other side of that is, you know, that's not the end. One of the things that I tell our friends in Washington is, there's no excuse why China is the number one investor in Palau. You're our ally, U.S. should be investing in Palau. Australia should be investing in Palau. Japan should be investing in Palau.
RAO: Are they?
WHIPPS: The good news is, a hotel that's being built by the DONKI group, that's Japanese investment. So this year, I can safely say that the number one investor is Japanese, outside of government projects and military projects. That's the number one investor, and that's what we want to see. We want to see our allies investing in Palau.
RAO: That's part two of KPRG's exclusive interview with Palau President Surangel Whipps Jr. Coming up in this series...
WHIPPS: We have great programs with our government to help train teachers trained nurses, doctors, and guess where they all go? They move to America. Because they're not paid enough.
RAO: And more on Palau's economy, governance, and international relations only on 89.3 FM or live stream us on our website at www.islapublic.org. This episode was reported produced and edited by me Naina Rao, with help from reporter Gilayna Santos, and producer David Lopez. Music used was from Blue Dot Sessions.
