Australia can take USAID’s place in the Pacific islands
One of the first aims of the United States’ new Department of Government Efficiency was shutting down USAID. By 6 February, the agency was functionally dissolved, its seal missing from its Washington headquarters.
Amid the sudden shutdown, Australia must increase its developmental aid to Pacific islands before China fills in.
The most aid-dependent countries—the Freely Associated States, including Marshall Islands, Palau and the Federated States of Micronesia—happen to be among the most strategically located for US resistance to possible Chinese aggression against Taiwan, Japan and the Philippines. Maintaining aid to them is doubly important.
Moreover, island countries across the Pacific suffer from intense poverty and are unusually vulnerable to climate change.
The Pacific islands’ geostrategic importance necessitates aid to achieve ideal defensive posture. The primary military value of the islands is that they enable the US to disperse military assets across the wide expanse of the region. The second island chain provides several secondary and tertiary operating locations important in a Sino-American conflict. Important islands include Palau, and Yap and Chuuk in the Federated States of Micronesia.
The Pacific is important to China’s counterinsurgency strategy, which aims to prevent reinforcement of the US’s position inside the first island chain. Limiting access is the name of the game for military strategists on both sides of the Pacific. If Beijing were to convince countries in the second island chain to let the Chinese army’s rocket force deploy ballistic missiles on their soil, that would be devastating for the US. The DF-17 medium-range ballistic missile has a range of 1600km, while the DF-ZF hypersonic glide vehicle has a range of 2000km. Given that there are currently no viable defences against hypersonic weapons, this would effectively box US navy carrier strike groups out of much of the Pacific Ocean.
The Pacific is the world’s most aid-dependent region and thus particularly susceptible to China’s coercion. Pacific states are small with few natural resources, making them reliant on aid to develop. Between 2008 and 2021, the region received more than US$40 billion in aid.
Aid packages are only effective in scoring geopolitical influence insofar as they align with the priorities of Pacific countries, which are increasingly concerned with adapting to the negative impacts of climate change. This makes complete sense: rising sea levels, declining fish populations and increased natural disaster prevalence all spell a true existential threat. With the planet surpassing the 1.5 degrees C limit outlined in the Paris Climate Agreement, Pacific island states will need further aid to diversify food sources and build seawalls. USAID created the Pacific-American Climate Fund in 2020 specifically to help Pacific island countries weather the effects of climate change through grants and loans to local organisations. This program ceased with the agency’s sudden closure.
It is perfectly reasonable for these states to look for a more reliable source of funding, which China is eager to provide. This is a real threat: on 15 February, the Cook Islands signed a comprehensive strategic partnership agreement with China. This agreement is just the latest in a series: in 2019, China sent generous economic aid to Solomon Islands, leading the Pacific state to drop its diplomatic recognition of Taiwan. Kiribati soon followed.
Australia is the ideal candidate to aid the freely associated states to prevent a Chinese fill-in. China is the second-largest provider of aid to the Pacific after Australia. US aid is primarily directed to the Federated States of Micronesia, Marshall Islands and Palau, with whom the US has Compacts of Free Association. These three states contain key dispersed military operating locations and they received about 82 percent of the roughly US$250 million the US sent to the region in 2022. These states are therefore sensitive to a funding freeze. The Biden administration signed into law US$7.1 billion in aid to them in 2024, though USAID’s axing has likely disrupted this funding.
Australia is best equipped to fill the void left by the US, given its robust relationships with many Pacific countries. Additionally, most US money dedicated to Pacific aid goes through Australian NGOs. This decreases the need to alter existing programs, which increases the chances of a smooth transition.
The shutdown of USAID has been an enormous hit to US soft power and its ability to counter China in the Pacific. But the worst outcomes can be avoided through the intervention of steadfast allies—especially Australia.
This article has been amended to omit references to AusAID, which was absorbed into the Department of Foreign Affairs and Trade in 2013.