The 2nd Compact Review Agreement initialed this week by Palau Chief Compact Negotiator Kaleb Udui Jr. and US Special Envoy Joseph Yun is the “most significant since the first Compact relationship” with the United States of America said Palau’s legal advisor Jeff Farrow.

Mr. Jeff Farrow, who served as Palau’s legal advisor during the first Compact negotiation in the 1980s and the first Compact Review Agreement negotiation in 2010, said that this 2nd Compact Review “fundamentally changed the arrangements” between the United States and Palau under the Compact.

The position of the United States during the first negotiation of the Compact was to give Palau a certain amount of money to use for 50 years and have Palau sign over its defense rights in perpetuity.  After 50 years, Palau should be self-sufficient, and the United States will no longer provide funding, according to Mr. Farrow. 

This has been the United States’s position approaching the negotiations in the first CRA negotiation and this 2nd CRA negotiation, said Farrow.

The position changed when President Surangel Whipps Jr. insisted that the United States negotiate with Palau equitably.  Farrow said Mr. Blinken was shocked when President Whipps refused to negotiate based on the initial offer made by the United States in 2020 of $430 million and insisted on starting anew.

“They (US) made every effort to force President Whipps to resume negotiations that started in 2020,” Farrow revealed.

Whipps’s position was that “as long as Palau plays a vital role in keeping Indo-Pacific free, US has the responsibility to Palau.”  This, Farrow said, “fundamentally changed the arrangements.”

“If it has to be good for the US, it should be good for Palau.  It shouldn’t be one way,” insisted Whipps.

As a result, the United States approved the appointment of Mr. Joseph Yun, the Special Envoy appointed to head negotiations with countries with Compacts of Free Association.

The United States also approved the automatic renewal of this CRA after 20 years, removing the threat of a fiscal cliff built into the Compact Agreement.

This was possible, Farrow said, because President Whipps had the “wisdom, courage, and strength” to tell the top US officials the truth.

Farrow added that it was the right time to make demands because of the geopolitics.  “In politics, timing is everything, and we benefited from the right time.”

When the first Compact Review Agreement was negotiated in 2010, the United States and China were not at odds, and Russia was no longer perceived as a threat as seen in the early 1980s.

There is economic competition with China and an effort to keep the Indo-Pacific free and open.  “It is the right time to make demands,” expressed Farrow.

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