International rights groups have criticised the US government’s removal of Thailand from its global list of the worst offenders in human trafficking, branding it “the wrong decision at the wrong time” and claiming the move was politically motivated.

In the US State Department’s Trafficking in Persons (TIP) report, published on Thursday, Thailand is upgraded from tier 3, the lowest ranking on the list, to the tier 2 watchlist, indicating that the US government believes the Thai government has met the minimum standards required to fight trafficking.

The report cites “significant efforts” made by the Thai government to eliminate human trafficking within its borders. An increase in investigations, prosecutions and convictions, together with amended anti-trafficking legislation, were identified as factors in Thailand’s improved status.

However, the report also pointed to evidence of continued trafficking in the fishing, sex, agriculture and domestic work industries, as well as ongoing government complicity in trafficking crimes, which rights groups claim seriously impedes efforts to eradicate trafficking and slavery.

Steve Trent, executive director of the Environmental Justice Foundation, which has published a series of investigations into the multi-billion dollar Thai seafood sector, said the upgrade was “the wrong decision at the wrong time” and called on more durable reforms to ensure that “corrupt practices, which have driven so many abuses, are addressed”.

“While it is certainly clear that actions have been taken and some advances have been made and that these should be acknowledged and applauded, EJF’s view, informed by our active investigations at sea and on shore, is that these advances have not eradicated the trafficking, forced, bonded or slave labour in the seafood sector,” said Trent.

Numerous reports and investigations, not least those by the Guardian, have found that slavery, trafficking, murder and corruption at all levels of the Thai government still pervade Thailand’s fishing industry.

The annual Trafficking in Persons report ranks countries in a three-tier system on their effectiveness in tackling human trafficking and other forms of slavery. Under US law, tier 3 status could trigger non-trade related sanctions, leading to restrictions on US foreign assistance. Tier 3 countries may also be denied access to global financial institutions such as the World Bank.

The report, which has been published since 2001, is the principal diplomatic tool with which the US engages foreign governments on human trafficking. However, a Reuters investigation last year claimed that senior US diplomats had repeatedly overruled the State Department’s anti-trafficking unit and inflated the grades of 14 strategically important countries, with US lawmakers and anti-trafficking groups calling for reforms.

“The TIP report can be a great diplomatic tool to fight modern slavery, but only if the State Department is going to rank countries honestly according to what’s happening on the ground,” said Kristen Abrams, director of the Alliance to End Slavery and Trafficking, a coalition of 13 US-based human rights organisations.

“Congress [may now] need to step in and make some legislative changes, so that in 2017 [the report] returns to the place of an effective tool.”

Aidan McQuade, director of Anti-Slavery International, described the report as “deeply disappointing”. He said: “Too often the TIP report pays too much attention to US strategic interests rather than the evidence available. As a result, it undermines both its purpose and its cause.”

Thai businesses and the Thai government expected to see a boost in exports and consumer confidence in Thai products.

Major General Sansern Kaewkamnerd, spokesman for the Thai premier’s office, told Reuters that the upgrade proved that the prime minister, Prayuth Chan-ocha, had honoured his pledge to fight human trafficking.

“The international community will see that what the prime minister told the international community he would do, he did,” Sansern said.

Sudan, Uzbekistan, Myanmar and Haiti were all relegated to the TIP’s lowest tier for failing to take action on modern slavery within their borders.

Myanmar demotion to the bottom tier is a strong indication that the US expects the country’s democratically elected government to take action on human rights abuses, including the continued use of child soldiers, forced labour and the ongoing persecution of the country’s Rohingya Muslim minority.

Uzbekistan returned to tier 3 status a year after it was promoted to the tier 2 watchlist, a change prompted by reports of intimidation and violence against anti-slavery activists trying to document forced labour in the national cotton industry.