What’s happened?

On September 25th the US president, Joe Biden, hosted the second US-Pacific Islands Forum Summit with Pacific island leaders—excluding the prime ministers of the Solomon Islands and Vanuatu, who declined the invitation. Mr Biden used the opportunity to announce new US funding and programmes for the region. On top of US$810m in initiatives announced last year, the US announced nearly US$200m in new funding.

Why does it matter?

The US is continuing its diplomatic and development step-up in the Pacific. The US has long-standing regional interests—it operates military bases across the region through its Compacts of Free Association (COFA) relationships, but until recently had leaned more on its regional allies, Australia and New Zealand, to lead on development and aid. Mr Biden’s hosting of a second summit within a year confirms a shift in approach, and is backed up by meaningful commitments. The US has extended diplomatic recognition to the Cook Islands and Niue; opened new embassies (with planned consular services) in the Solomon Islands and Tonga; and expanded trade financing and development funding. China’s influence in the Pacific has been a key driver of US re-engagement.

Pacific islands will welcome the opportunity to deepen ties with the US, although some scepticism will persist. A more engaged US offers distinct economic and security benefits for the Pacific islands, which are heavily reliant on external development funding and also welcome US leadership on climate change. Nonetheless, US pledged funding can be slow to materialise, owing to complex approval processes, and there will be wariness that US interest will recede if next year’s election leads to a change in administration.

Geopolitics is becoming a divisive force in the Pacific. The Solomon Islands’ decision to stay away from the summit follows its signing of a security agreement with China in 2022, and a more pro-China administration recently came to power in Vanuatu. Meanwhile, the US signed its own security pact with Papua New Guinea in May. Geopolitical competition promises development chances, but will hinder collective action on issues such as climate change and the functioning of regional institutions such as the Pacific Islands Forum.

What next?

US commitments at the summit will require passage through Congress (the legislature), which is still working through pledges made at last year’s meeting. The other priority for the US will be to conclude a COFA extension with the Marshall Islands prior to the arrangement’s expiry at end-September (COFA renewals with Palau and the Federated States of Micronesia have already been signed). We think that the COFA extension will be settled by end-2023 at the latest, even if a looming US government shutdown means that the deadline is missed.

The analysis and forecasts featured in this piece can be found in EIU’s Country Analysis service. This integrated solution provides unmatched global insights covering the political and economic outlook for nearly 200 countries, enabling organisations to identify prospective opportunities and potential risks.