Compacts of Free Association Bind Three Pacific Nations

WASHINGTON, Nov. 6, 2026 — Three Pacific island countries — the Marshall Islands, the Federated States of Micronesia and Palau — govern their ties to the United States through Compacts of Free Association, agreements the Congressional Research Service describes as the legal backbone of a relationship that mixes sovereignty, economic aid and U.S. defense rights. CRS places the three Freely Associated States roughly 2,500 miles southwest of Hawaii, in a maritime area larger than the continental United States, with a combined population of about 200,000.

The countries are independent U.N. members. They are not U.S. territories. Under the compacts they receive economic assistance and security guarantees, and they grant the United States the right to operate military bases and to make decisions that affect their external security.

How the agreements were built, and what they cost

The Marshall Islands, Micronesia and Palau were districts of the U.S.-administered U.N. Trust Territory of the Pacific Islands after World War II. Rather than become territories or a commonwealth, the Marshall Islands and Micronesia signed compacts in 1982. Congress approved those pacts in 1985, and they took effect in 1986. The Palau compact was approved by Congress in 1986 and 1989, ratified in Palau in 1993 and entered into force in 1994, CRS reports.

Economic aid was written with expiration dates. Defense, security and migration provisions were not. Congress extended economic assistance to the Marshall Islands and Micronesia for fiscal 2004 through 2023, and later approved a new Palau review agreement that, CRS says, came into force in March 2024 and provides Palau $889 million in grants and trust-fund contributions for another 20 years.

The 2023 renewal packages, enacted in the Compact of Free Association Amendments Act of 2024 (P.L. 118-42), cover fiscal 2024 through 2043. CRS reports grant and trust-fund totals of about $2.3 billion for the Marshall Islands, $3.3 billion for Micronesia and about $0.9 billion for Palau, plus $634 million to continue U.S. Postal Service operations. Compact aid has amounted to roughly 80 percent of all U.S. assistance to the Pacific Islands region, according to estimates CRS cites.

Citizens of the Freely Associated States may live and work in the United States as lawful nonimmigrants. CRS says more than 94,000 live in the United States, including U.S.-born children with dual citizenship. The three countries do not field their own militaries; their citizens may join the U.S. armed forces, and more than 1,000 serve, CRS reports.

Why the Pentagon treats the islands as strategic ground

The U.S. military operates the Ronald Reagan Ballistic Missile Defense Test Site at U.S. Army Garrison-Kwajalein Atoll in the Marshall Islands. The 2003 amended compact extended U.S. rights there through 2066, with an option for another 20 years, CRS says. The same brief records that the Defense Department established Joint Task Force-Micronesia in June 2024, based in Guam, to coordinate defense operations in the Southwest Pacific, including the compact states.

Nuclear testing remains part of the Marshall Islands file. From 1946 to 1958 the United States conducted 67 atmospheric tests at Bikini and Enewetak, CRS reports. Washington has provided, by some estimates CRS records, roughly $600 million for damages, cleanup, resettlement and health programs; the Marshall Islands claims about $3 billion in uncompensated damages. The 2023 compact with Majuro includes a $700 million trust fund that the Marshall Islands government says will address needs of those affected by the tests.

The Interior Department has said the compacts advance economic growth and “reinforce alliances that support a free and open Indo-Pacific,” CRS reports. The Interior Department’s Office of Insular Affairs administers Compact financial assistance through joint economic committees with Micronesia and the Marshall Islands, and it administers funds directly to Palau under the Palau Compact and later review agreement. That sentence is a policy claim. The legal text underneath it is more specific: aid with an end date, defense rights without one, and a U.S. military geography that runs from Guam through Kwajalein into the wider Pacific. Background on the region is collected on the Pacific Islands hub and the Oceania hub. See also what the first island chain is and the Indo-Pacific theater page.

Sources

• Congressional Research Service: The Compacts of Free Association (IF12194)
• U.S. Department of the Interior: Compacts of Free Association

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