The United States yesterday blacklisted Thailand and Malaysia for failing to meet its minimum standards in fighting human trafficking, a move that could strain relations with the two countries.
The US State Department, however, improved its rating of China, citing Beijing's steps to abolish labour camps.
Secretary of State John Kerry launched the annual US assessment of how 188 governments have performed in fighting the flesh trade and other forms of exploitative labour.
Thailand had mounted a campaign to prevent a downgrade, which could hurt its seafood industry, for which the US is a key market. The Thai ambassador to the US Vijavat Isarabhakdi expressed disappointment with the downgrade, saying the report did not recognise "our vigorous, government-wide efforts that yielded unprecedented progress and concrete results".
The "Trafficking in Persons Report" is based on the actions governments take, rather than the scale of the problem in their country. "There cannot be impunity for those who traffic in human beings. It must end," Kerry said, describing it as slavery in the 21st century and an illicit business generating annual profits of US$150 billion.
Thailand and Malaysia are among 23 countries to receive the lowest ranking, "tier three", including Iran, North Korea, Russia, Saudi Arabia, and Syria.
China, put on tier three last year, was elevated to a watch list.
US President Barack Obama now has 90 days to determine whether to apply sanctions against tier three governments.
The report notes Thai civilian and military officials reportedly profited from the smuggling of minority Muslims from Myanmar and Bangladesh, and their sale into forced labour on fishing vessels.
The US contended that anti-trafficking law-enforcement efforts in Malaysia had decreased, with less investigations and convictions last year than in 2012.
Migrant workers on palm-oil plantations, construction sites, textile factories and in homes as domestic helpers faced wage fraud and restrictions on their movement, the report said.