believes will obviate many current problems caused by the annual
budget process, which it claims disrupts effective economic
planning.
In their comments on this report, the governors of
American Samoa and the Virgin Islands also supported the establishment
of
a long-term economic development and
financial
assistance agreement with the federal government.
The general exemption from federal laws called for in the
Compact is another potential area of interest to the territories.
The application of federal laws is a major issue in the
territories,
(seé ch. 5.) and the fact that the FAS will be
exempt from most federal laws has already raised some concerns.
For example, Guam officials are concerned that because the FSM
and the Marshall Islands will be exempt from U.S. immigration
laws and its residents will have free access into the United
States and its territories, an influx of immigrants to Guam
might occur, causing economic and social problems.
Guam offi-
cials would like to control their own immigration laws,
a right
currently enjoyed by the NMI.
If granted such authority, Guam
could conceivably remedy any future possible immigration problems from the FAS.
The exemption from federal laws may also give the MicroneSian states a competitive advantage because they will no longer
face
the
same
federal
and
regulatory
constraints
as
the
U.S.
territories.
For example, although the FAS already establish
their own wage and tax laws, under the Compact they will be able
to establish new investment and economic incentives to attract
Asian and U.S. industries which could compete with the flag ter-
ritories.
access
The
FSM
to the U.S.
and
the
Marshall
Islands
market with the other U.S.
will
have
territories.
equal
For
example, with the removal of federal regulations and establish-
ment of economic incentives, they could become more competitive
with the tuna industry in American Samoa.
CONCLUSION
The Compact of Free Association represents a unique status
arrangement between the United States and the Micronesian states
of the FSM and the Marshall Islands.
If approved,
it will
establish a political relationship markedly different than the
relationship between the United States and its flag territories.
Under the Compact, the FAS will enjoy their own sovereignty and,
except for defense and security matters will be largely independent, self-governing bodies.
The key provisions of the Compact--economic assistance,
foreign affairs, and domestic authority--are likely to attract
the interest of the flag territories because they address areas
of current concern to them,
We believe U.S. policymakers will
face
new
challenges
to
result of the Compact.
5000228
improve
U.S.-territory
21
relations
as
a