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September 11, 1998

SUBJECT: Sullivan-Bodde Exchange on Development under the Compact of Free Association

I hope the recent articles reflecting the views of Dr. Sullivan and Ambassador Bodde about development during the first Compact period mark the beginning of a discussion about the relationship that should be obtained for the second. Amb. Bodde was correct that failure to achieve a market economy was a major failure. This was probably inevitable as the Compacts were negotiated in the years that followed the Kennedy Administration's decision to undertake massive public spending projects in the area, which replaced the previous policy of protecting the area from outside intrusion while essentially leaving it alone. While the political thinking in the US had changed from viewing the government as a solution to being part of the problem, that change was not duplicated in the Pacific Islands, and, moreover, the primary US aim was to end the Trusteeship. I do not follow how Dr. Sullivan can count improvements in housing and communication as development when it was sustained by outside funds rather than locally generated revenues. Compact funding is certainly "foreign aid" regardless of budget category; food stamps are welfare even though found under the Agriculture Department.

Amb. Bodde makes one suggestion that merits wider debate. He supports continued free immigration to the US as a "safety valve." The effect so far has been more of a siphon. Well intentioned, if misguided, tariff concessions have created textile industries employing imported workers from Korea, Taiwan, China, etc., while many educated Micronesians have departed to the US. Those Micronesians who claimed employment in local government, which can't be filled by Asians, have held on. (Term limits lack appeal.) The textile industries are large users of power and water, both expensive to produce in the islands. The actual benefit to the islands of the immigration situation should be carefully examined.

There is also the impact on Hawaii and Guam. Increasing concern has arisen over the impact of unfunded mandates of the Federal government. Guam and Hawaii have borne the major burden of Micronesian immigration, which was largely ignored in negotiating the first Compacts. The structure of the US foreign policy formulation makes consideration of the interests of individual states and territories quite awkward, but I am not aware of any attempt to insert those interests by Hawaii or Guam in the negotiations of the first Compacts. Continued free immigration by Micronesians may be necessary or even desirable, but should be explicitly studied and not assumed. Continued inflow of "nonresident" workers, some of whom are attempting to illegally enter the US, benefits neither the US nor the islands, although certain islanders benefit enormously.

I look forward to reading additional views.

Steven R. Pruett, US Department of State (Retired) Principal Officer, Palau 1987-90 Pacific Islands Desk 1982-85 MA Economics, University of Hawaii 1973 Peace Corps Volunteer, Samoa 1969-71

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