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San Francisco, California April 28, 2000


The Federated States of Micronesia (FSM) and the United States (U.S.) governments completed their second round of negotiations in a spirit of cooperation. Chief Negotiator, Senator Peter Christian, heads the FSM delegation, and Special Negotiator, Allen P. Stayman, leads the framework for U.S. financial assistance to the FSM after the current financial assistance provisions of the Compact of Free Association expire in 2001.

The FSM Proposal

The FSM, referring to the four principles of the future relationship of the U.S. and the FSM adopted by the parties at their first round of negotiations, presented two documents to the United States. The first document was a macroeconomic Strategic Planning Framework (SPF), which expresses the outcome of its recent Economic Summits. The second document was a proposal for future U.S. assistance to the FSM under the Compact.

The FSM described the proposal as representing its needs for U.S. assistance in light of the SPF. The proposal also addressed the need to define a mechanism for ending U.S. grant assistance to the FSM within a defined timeframe.

The FSM proposed that U.S. grant assistance continue at current levels (approximately $84 million per year) and that its access to U.S. Federal programs also continue. In addition, the FSM proposed that the U.S. contribute $20 million each year into a trust fund until such time as the income from the fund equals the needs of the FSM government for assistance with government operations and investment, which the FSM estimates to be approximately 20 years. At that time, the FSM proposes, annual grant assistance to the FSM would be discontinued.

The U.S. Response and Proposal

The United States responded to the FSM proposal by stating that the U.S. is not prepared, at this time, to negotiate specific levels of funding. The U.S. proposed that, in the future, U.S. financial assistance will come in the form of grants in high priority social and economic sectors that are key to furthering the FSM’s efforts at advancing economic self-sufficiency. The United States proposed that U.S. assistance be directed towards five broad sectors: (1) health; (2) education; (3) infrastructure; (4) capacity building/good governance and (5) private sector development.

The parties agreed that these five broad areas would be appropriate for sectoral grants. The parties also agreed that improved transportation, environmental protection, increased accountability and transparency are common, "cross-cutting," objectives to be considered in implementing each of these sectoral assistance grants. According to the United States, the private sector grant would be aimed, among other things, at furthering the FSM’s efforts to develop fisheries, agriculture, and tourism as priority areas for growth. Although the United States did not discuss specific funding levels, it noted that the U.S. remains committed to the economic stability and well being of the FSM by providing substantial financial assistance at a constant level over many years.

The United States also expressed general support for the FSM’s concept of using a trust fund as a means of achieving the parties’ mutual objective of terminating mandatory annual financial assistance to the FSM. The United States noted, however, that it has not yet determined what level of funding it is willing to provide, what restrictions should be placed on the fund, what a reasonable balance would be at the end of the new term of U.S. financial assistance, and what contributions from non-U.S. sources should be expected.

The talks also include a discussion of past U.S. program and categorical grant assistance, and a review of the FSM’s strategic framework for future economic and social development. Both sides expressed continued satisfaction with the process of the negotiations, and agreed to have their experts work together to build upon matters discussed during this round.

On April 28, the United States also presented a letter to the FSM Department of Foreign Affairs expressing the need to resolve a number of migration issues during the current negotiation period. The FSM Secretary of Foreign Affairs stated that the FSM would provide a response to this letter through diplomatic channels.

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