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Statement of C. Steven McGann
Acting Deputy Assistant Secretary of State
Bureau of East Asian and Pacific Affairs
Department of State

Before the House Committee on Foreign Affairs
Subcommittee on Asia, the Pacific, and the Global Environment
July 25, 2007

An Overview of the Compact of Free Association between the United States and the Republic of the Marshall Islands: Are Changes Needed?

Chairman Faleomavaega, Ranking Member Manzullo, and distinguished Members of the Subcommittee, thank you for inviting me to appear today to testify on U.S. policy towards the Republic of the Marshall Islands (RMI). I welcome the opportunity to testify on the RMI. As we have already heard from my colleagues at the Department of Interior, I will focus my remarks on effects of Compact implementation on the state of our diplomatic relations with the Marshall Islands.

Mr. Chairman, the United States and the Marshall Islands have had a close and important relationship since shortly after the end of the Second World War, when the RMI became part of the U.N. Trust Territory of the Pacific Islands under the administration of the United States. In 1986, the Marshall Islands entered into a Compact of Free Association with the United States. This Compact was Amended in 2004. The original Compact assisted the Marshall Islands in its transition from Trust Territory to democratic self-government and membership in the world family of nations. The Amended Compact, through its extensive defensive provisions, continues to ensure the security of the Republic of the Marshall Islands and contribute to the security of the United States.

The relationships between our citizens are also strong. The Marshalls are host to some 1,800 Americans who work along with 1,200 Marshallese at the Ronald Reagan Ballistic Missile Defense Test Site on Kwajalein Atoll. Also, Marshallese and U.S. citizens can live, work and study in each other's countries without needing a visa, and Marshallese serve in our military, including in Iraq and Afghanistan. Importantly, the RMI is a tremendous ally of the United States in international fora such as the UN, where the RMI and the U.S. vote together over 90 percent of the time, including some on very contentious issues. The RMI participates in major U.S. maritime security treaties, and we greatly appreciate its efforts to make the world's fifth largest ship registry secure, a huge aspect of U.S. port security. In short, the RMI and the U.S. are true friends.

This has helped us work through challenges of the Amended Compact framework and allowed the relationship to perservere as the RMI made the transition from the old Compact to the current one.

Our vision for U.S.-RMI relations is to continue to strengthen this collaboration, using the Amended Compact as a tool for the RMI to build a future predicated upon its own priorities with the ultimate goal of self-sufficiency. I am the State Department's representative to the U.S.-RMI Joint Economic Management and Financial Accountability Committee (JEMFAC) and the Trust Fund for the People of the Republic of the Marshall Islands. The RMI has made commendable progress towards self-sufficiency in the past year that I've been a committee member. The U.S. can't discount the great difficulties that the Marshall Islands government overcame in the past years in moving towards performance-based budgeting and developing a medium and long-term budget framework. These were critical first steps, and the RMI government should be praised for taking them, but much more needs to be done.

The RMI needs to make a further commitment to structural reform and vigilant fiscal prudence. I believe the key next step for the RMI this year will be to set reasonable reform priorities and develop implementation plans to carry through those reforms. Our role in the U.S. is to provide technical assistance to the RMI to support these activities. I believe the Amended Compact, at this time, provides an appropriate framework for the RMI to select priority sectors for funding and provides sufficient flexibility to develop capacity. However, sector grants for the private sector and for public sector capacity development remain, in my view, underutilized by the RMI to date.

Another critical element to the U.S-RMI relationship is the U.S. Army's Kwajalein Atoll base. It is the largest private employer in the RMI and a vital element of U.S. national security. At this time there are internal disputes in the RMI over how the base will fit into the future of Kwajalein atoll. The U.S. and RMI government have concluded a Military Usage and Operating Rights Agreement which allows the U.S. use of the Kwajalein atoll until 2066. At this time, however, the local landowners and the government of the RMI have yet to come to terms on a new Land Use Agreement. This is an internal matter, one that the government of the RMI and the Kwajalein landowners must settle between themselves. We are confident that this internal issue can be resolved and our use of Kwajalein will continue, to the benefit of both nations. I understand that the RMI would like to pursue additional claims for its citizens affected by U.S. nuclear testing. On the issue of nuclear claims, the United States government reached agreement with the RMI on most of the suits. Outstanding lawsuits are currently being reviewed in the U.S. federal claims court.

On a final note, I commend our Ambassador and his staff for their tireless work to advance this solid relationship. Ambassador Clyde Bishop, the Embassy staff and our JEMFAC colleagues at the Departments of Interior and Health and Human Services are the cornerstones of the robust relationship we have with the Marshall Islands. Despite some challenges, the ties between our nations have expanded and matured, as is evident in the wide range of issues on which the U.S. and the Marshall Islands cooperate. In the past year these have included whaling, telecommunications, maritime security, and the environment, just to name a few. Further, we were very grateful for RMI President Note's leadership in making the Pacific Island Conference of Leaders, held in Washington earlier this May a success.

Mr. Chairman, the RMI has been a solid partner to and valued friend of the United States. The RMI leadership has made a determined effort to adhere both to the letter and the spirit of the Amended Compact. The theme we see repeated through our interactions with the RMI is one of dialogue - the foundation of good relations. It is my great privilege to be able to help foster this relationship, one of our closest, as it continues to mature in the future. I look forward to my continued work with the RMI as we continue to advance implementation of the Compact and support the RMI's progress to self-sufficiency.

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