Thailand, downgraded with Malaysia last year because of pervasive labor abuses in its lucrative fishing industry, remained on the blacklist.
That will add to the growing strains in its once-strong relations with Washington. Critics contend that Malaysia's upgrade is related to its participation in a US-backed trade agreement among Pacific Rim countries. Thailand is not part of the proposed agreement.
The department released today the annual US assessment of how 188 governments around the world have performed in fighting the flesh trade and other forms of exploitative labor.
Its upgrade comes a week after the US and Cuba formally restored diplomatic relations after a half-century of estrangement. The US also removed Cuba from its list of state sponsors of terrorism in late May.
The department said Monday Cuba has for the second consecutive year reported efforts to address sex trafficking but has not reported efforts to tackle forced labour.
The Trafficking in Persons Report is one of several annual assessments issued by the department on human rights-related topics, but it's unusual in that it ranks nations, which can ruffle diplomatic feathers.
President Barack Obama now has 90 days to determine whether to apply sanctions against tier 3 governments. The president can block various types of aid and could withdraw US support for loans from the World Bank and International Monetary Fund.
But the US often chooses not to, based on its national security interests, as it did last year for both Thailand and Malaysia, which Washington views as important partners in its strategic outreach to Asia.
