WASHINGTON (Reuters) -- The United States took Malaysia off its list of worst offenders in human trafficking on Monday, removing a potential barrier to its joining a signature trade pact despite opposition from human rights groups and nearly 180 U.S. lawmakers.

The U.S. State Department's annual Trafficking in Persons report also upgraded Cuba from its lowest rank for the first time since it was included in the annual report in 2003.

South Sudan, Burundi, Belize, Belarus and Comoros were downgraded to the lowest rank, Tier 3, where Thailand remained for a second year, alongside countries with some of the world's worst trafficking records, including Iran, North Korea and Zimbabwe.

Egypt was downgraded, to the so-called "Tier 2 Watch List" status, while Cuba, Saudi Arabia and Uzbekistan were upgraded to "Tier 2 Watch List."

Malaysia's expected upgrade to the "Tier 2 Watch List" from Tier 3 removes a potential barrier to President Barack Obama's signature 12-nation Trans Pacific Partnership trade agreement, or TPP.

Congress approved legislation in June giving Obama expanded trade negotiating powers, but prohibiting deals with Tier 3 countries such as Malaysia.

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22 PHOTOS Human and sex trafficking issues around the world See Gallery US softens view of Malaysia, Cuba in human trafficking report A journalist takes photo of 24 alleged human traffickers' pictures displayed on a board, released by Italian police during a press conference in Palermo on April 20, 2015. AFP PHOTO / MARCELLO PATERNOSTRO (Photo credit should read MARCELLO PATERNOSTRO/AFP/Getty Images) SHAMLAPUR, BANGLADESH - JULY 4: A photograph of Rohingya trafficking victim Mohammad Aiaz is seen July 4, 2015 in Shamlapur, Bangladesh. On March 5, 2015 Aiaz met a man who promised to take him to a good job in Malaysia for free. He left Bangladesh with 13 other Rohingya. A few days after that his mother, Lila Begum, got a phone call from her son saying he was on the ship and that she needed to pay a man in Teknaf 200,000 taka ($2,570) or he would be killed. She managed to pay 175,000 but she has not heard from her son since. In the past months thousands of Rohingya have landed on the shores of Indonesia, Malaysia and Thailand, many of them by way of Bangladesh. The Rohingya pay up to $2,000 to traffickers, and they sail out from Bangladesh's southern coastline on fishing boats to meet larger ships in the deep sea that will take them to Malaysia. UNHCR estimates that there are more than 300,000 Rohingya living in Bangladesh. (Photo by Shazia Rahman/Getty Images) An armed Malaysian policeman checks a driver's documentations a day after the government announced the discovery of camps and graves, the first such sites found in Malaysia since a regional human-trafficking crisis erupted earlier this month, near Malaysia-Thailand borders in Wang Kelian on May 25, 2015. A total of 139 grave sites and 28 human-trafficking camps have been found in a remote northern Malaysian border region, the country's top police official told reporters. AFP PHOTO / MOHD RASFAN (Photo credit should read MOHD RASFAN/AFP/Getty Images) Sex workers and sympathizers demonstrate on April 9, 2015 against the closure of window brothels by the municipality in the red light district in Amsterdam. With Project 1012, the Amsterdam wants to close window prostitution to prevent crime, human trafficking and degradation. AFP PHOTO / ANP / ROBIN VAN LONKHUIJSEN - netherlands out - (Photo credit should read ROBIN VAN LONKHUIJSEN/AFP/Getty Images) Ivanka Trump speaks during a meeting on action to end modern slavery and human trafficking on the sidelines of the 72nd United Nations General Assembly at U.N. Headquarters in Manhattan, New York, U.S., September 19, 2017. REUTERS/Brendan McDermid ATHENS, ATTIKI, GREECE - 2017/10/14: Greek human right activists take part in the 2017 Walk for Freedom event raising awareness about Human Trafficking. (Photo by George Panagakis/Pacific Press/LightRocket via Getty Images) ATHENS, ATTIKI, GREECE - 2017/10/14: Greek human right activists take part in the 2017 Walk for Freedom event raising awareness about Human Trafficking. (Photo by George Panagakis/Pacific Press/LightRocket via Getty Images) Human trafficking suspect Patchuban Angchotipan, a former official in the provincial government of the southern province of Satun, arrives at the criminal court in Bangkok, Thailand, November 10, 2015. Eighty-eight human trafficking suspects arrested as part of a crackdown on Thailand's lucrative smuggling and trafficking syndicates were brought before a Bangkok court on Tuesday to start examination of evidence and witnesses ahead of a trial. REUTERS/Athit Perawongmetha Lieutenant-General Manas Kongpan, a suspected human trafficker, is escorted by officers as he arrives for a hearing at the criminal court in Bangkok, Thailand, March 15, 2016. REUTERS/Chaiwat Subprasom Timothy Patrick Deegan, who has been charged with human trafficking after being accused of keeping three women as sex slaves in Gainesville, Florida, is seen in an undated photo released by the Alachua County Sheriff's Office in Gainesville, Florida. Deegan, 53, a Florida certified public accountant, remained behind bars on June 12, 2014, on a $300,000 bond following his arrest on June 6, 2014. REUTERS/Alachua County Sheriff's Office/Handout via Reuters (UNITED STATES - Tags: CRIME LAW HEADSHOT) ATTENTION EDITORS ? THIS PICTURE WAS PROVIDED BY A THIRD PARTY. REUTERS IS UNABLE TO INDEPENDENTLY VERIFY THE AUTHENTICITY, CONTENT, LOCATION OR DATE OF THIS IMAGE. FOR EDITORIAL USE ONLY. NOT FOR SALE FOR MARKETING OR ADVERTISING CAMPAIGNS. THIS PICTURE IS DISTRIBUTED EXACTLY AS RECEIVED BY REUTERS, AS A SERVICE TO CLIENTS Nebraska Attorney General Doug Peterson talks about sex traffickers in Iowa and Nebraska during a human trafficking seminar, where opponents of the proposed Keystone XL Pipeline expressed concerns that "man camps" created during construction of the pipeline might bring the sex trade to their area in O'Neill, Nebraska, U.S. April 12, 2017. Picture taken April 12, 2017. REUTERS/Lane Hickenbottom Backpage.com CEO Carl Ferrer, center, and controlling shareholders James Larkin, left, and Michael Lacey, right, listen to Sacramento Superior Court Judge Lawrence Brown during a hearing on Wednesday, Aug. 23, 2017, in Sacramento Superior Court. (Hector Amezcua/Sacramento Bee/TNS via Getty Images) Japanese national Susumu Fukui (2nd R) is escorted by Cambodian police to the Phnom Penh municipal court in Phnom Penh on February 7, 2017. Fukui, a Japanese restaurant owner accused of overseeing a smuggling ring that forced women into sex work in Japan, was charged with trafficking in Cambodia on February 7, along with his wife and an employee. / AFP / TANG CHHIN Sothy (Photo credit should read TANG CHHIN SOTHY/AFP/Getty Images) TANGERANG, INDONESIA - AUGUST 16: Suspects of human trafficking arrive at Soekarno-Hatta Airport on August 16, 2016 in Tangerang, Indonesia. 9 Suspects while smuggling 16 people from the sea port promontory hall, North Sumatra province to Malaysia got raided and arrested by police. An estimated 6 million Indonesian laborers (70% of whom are female) work abroad. Many Indonesian workers who have migrated to the Middle East and Asia have been subjected to exploitation. According to the 2013 US Trafficking In Persons Report, Indonesia is a major source country for women, children, and men who are subjected to sex trafficking and forced labor.' PHOTOGRAPH BY Jefta Images / Barcroft Images London-T:+44 207 033 1031 E:hello@barcroftmedia.com New York-T:+1 212 796 2458 E:hello@barcroftusa.com New Delhi-T:+91 11 4053 2429 E:hello@barcroftindia.com www.barcroftmedia.comA (Photo credit should read Jefta Images / Barcroft Images / Barcroft Media via Getty Images) TANGERANG, INDONESIA - AUGUST 16: Suspects of human trafficking arrive at Soekarno-Hatta Airport on August 16, 2016 in Tangerang, Indonesia. 9 Suspects while smuggling 16 people from the sea port promontory hall, North Sumatra province to Malaysia got raided and arrested by police. An estimated 6 million Indonesian laborers (70% of whom are female) work abroad. Many Indonesian workers who have migrated to the Middle East and Asia have been subjected to exploitation. According to the 2013 US Trafficking In Persons Report, Indonesia is a major source country for women, children, and men who are subjected to sex trafficking and forced labor.' PHOTOGRAPH BY Jefta Images / Barcroft Images London-T:+44 207 033 1031 E:hello@barcroftmedia.com New York-T:+1 212 796 2458 E:hello@barcroftusa.com New Delhi-T:+91 11 4053 2429 E:hello@barcroftindia.com www.barcroftmedia.comA (Photo credit should read Jefta Images / Barcroft Images / Barcroft Media via Getty Images) MEWAT, INDIA - MARCH 13: Ghausia Khan a bride trafficking survivor, is a member of the district legal aid authority, Mewat is showing the images of enlisted Paros on March 13, 2014 in Mewat, India. Khan a worker with Empower People, an NGO which deals with trafficking cases and helps women in distress to find lawyers and provides them with legal information and at times, monetary assistance. Trafficked brides are locally known as Paro or Molki (means one who has a price). These are pejorative labels in Haryana, Punjab and western Uttar Pradesh where the skewed sex ratio and entrenched feudalism has resulted in a flourishing trade in women trafficked from the poverty-ridden villages of Assam, West Bengal, Jharkhand and Odisha. The women, who are usually promised marriage, find themselves in places like Mewat where the go-betweens sell them sometimes repeatedly to men who cannot find local women. Cut off from their native states, they are often confined and forced to work as bonded labour or pushed into forced marriages or prostitution. (Photo by Subrata Biswas/Hindustan Times via Getty Images) MEWAT, INDIA - MARCH 13: Ghausia Khan a bride trafficking survivor, is a member of the district legal aid authority, Mewat is showing the images of enlisted Paros on March 13, 2014 in Mewat, India. Khan a worker with Empower People, an NGO which deals with trafficking cases and helps women in distress to find lawyers and provides them with legal information and at times, monetary assistance. Trafficked brides are locally known as Paro or Molki (means one who has a price). These are pejorative labels in Haryana, Punjab and western Uttar Pradesh where the skewed sex ratio and entrenched feudalism has resulted in a flourishing trade in women trafficked from the poverty-ridden villages of Assam, West Bengal, Jharkhand and Odisha. The women, who are usually promised marriage, find themselves in places like Mewat where the go-betweens sell them sometimes repeatedly to men who cannot find local women. Cut off from their native states, they are often confined and forced to work as bonded labour or pushed into forced marriages or prostitution. (Photo by Subrata Biswas/Hindustan Times via Getty Images) A court order is seen hanging with red wax on the main door of the closed Oragon/Sideway club which was used by sex traffickers as a brothel in the area of Zouk Mkayel, north of Beirut on April, 14, 2016. Lebanese security forces busted a sex trafficking ring involving 75 Syrian women trafficked to Lebanon from their country and forced into prostitution. / AFP / JOSEPH EID (Photo credit should read JOSEPH EID/AFP/Getty Images) A general view shows the three-story Chez Maurice Hotel, which was used by sex traffickers as a brothel, in the Maameltein district of the coastal town of Jounieh, north of Beirut on April, 14, 2016. Lebanese security forces busted a sex trafficking ring involving 75 Syrian women trafficked to Lebanon from their country and forced into prostitution. / AFP / JOSEPH EID (Photo credit should read JOSEPH EID/AFP/Getty Images) A Syrian sex trafficking victim is seen making coffee in the kitchen of her safehouse at an undisclosed location in Lebanon on April 13, 2016, after she fled a brothel in Lebanon where she was being held captive. Lebanese security forces busted a sex trafficking ring involving 75 Syrian women trafficked to Lebanon from their country and forced into prostitution. / AFP / STRINGER (Photo credit should read STRINGER/AFP/Getty Images) Belle Plaine, Minnesota. Billboard showing the effects of sex slavery in the United States. (Photo by: Education Images/UIG via Getty Images) DENVER, CO - OCTOBER 13: FBI officials announced that 20 underage victims were recovered and 7 pimps arrested in Colorado and Wyoming as part of a national Operation Cross CountryIX. At the Denver FBI headquarters on Tuesday, October 13, 2015 18th Judicial District Attorney George Brauchler (second from left) cranes around to see the video display of sex traffickers and their recent sentences. Left to right: Dawn Weber Second Judicial District Chief Deputy District Attorney in charge of Cold Case Unit & Human Trafficking Unit Brauchler , and 18th Judicial District Deputy District Attorney Cara Morlan. (Photo by Cyrus McCrimmon/The Denver Post via Getty Images ) Up Next See Gallery Discover More Like This HIDE CAPTION SHOW CAPTION of SEE ALL BACK TO SLIDE

After a July 8 Reuters report on plans to upgrade Malaysia, 160 members of the U.S. House of Representatives and 18 U.S. senators wrote to Secretary of State John Kerry urging him to keep Malaysia on Tier 3. They said there was no justification for an upgrade and questioned whether the plan was motivated by a desire to keep the country in the TPP.

U.S. Under Secretary of State for Civilian Security, Democracy and Human Rights Sarah Sewall rejected the notion that any political considerations had influenced Malaysia's ranking.

"No, no, no," she told a news briefing when asked whether the upgrade was connected to a desire to maintain Malaysia's TPP eligibility. She said the decision was based on standards for how well it was dealing with the trafficking problem.

Sewall said Malaysia had made efforts to reform its victim-protection regime and its legal framework, and had increased the number of investigations and prosecutions compared to 2013.

Even so, she said: "We remain concerned that low numbers of trafficking convictions in Malaysia is disproportionate to the scale of Malaysia's human trafficking problem."

Sewall said Cuba, with which the United States reestablished diplomatic relations on July 1 after more than 50 years of Cold War estrangement, was upgraded due to progress in addressing sex trafficking, although Washington remained concerned about its failure to battle forced labor.

Rights groups said Malaysia's upgrade undermined the credibility of the U.S. report.

"Malaysia's record on stopping trafficking in persons is far from sufficient to justify this upgrade," Human Rights Watch said. "This upgrade is more about the TPP and U.S. trade politics than anything Malaysia did to combat human trafficking."

OBAMA ACCUSED OF PUTTING POLITICS AHEAD OF FACTS

Members of Congress who protested against the plan to upgrade Malaysia reacted angrily and accused Obama's administration of putting politics ahead of facts.

Sander Levin, a Michigan Democrat who has campaigned against TPP over labor rights, called Malaysia's upgrade "extremely concerning."

Representative Chris Smith, a New Jersey Republican who was one of the authors of the law that brought the U.S. trafficking report into being, criticized the decisions to upgrade Malaysia and Cuba as well as relatively lenient ratings given to Vietnam and China.

He said the report had "careened off into a new direction where the facts regarding each government's actions in the fight against human trafficking are given almost no weight when put up against the president's political agenda."

International scrutiny and outcry followed the discovery in May of scores of graves in people-smuggling camps near Malaysia's northern border with Thailand.

The State Department said that while Malaysia was making significant efforts, its trafficking convictions had dropped in the 12 months to March, falling to three from nine in the period covered by the report.

The report also described conditions under which migrants were still forced into labor, and women and children coerced into the sex trade.

Thailand, a key U.S. ally, whose relations with Washington have cooled since a military coup last year, said it "strongly disagrees" with the decision to keep it on the lowest ranking.

A statement from the Thai embassy said this failed to take account of "significant efforts undertaken by the Thai Government on all fronts during the past year."

At a ceremony to honor individuals for their anti-trafficking work, Kerry highlighted a report in Monday's New York Times about a Cambodian man who had been trafficked into Thailand and forced to work on fishing boats, including one on which he was shackled by his neck to prevent him escaping.

"We must never, ever allow a price tag to be attached to the heart and soul and freedom of a fellow human being," Kerry said.

Kerry is expected early next month to visit Malaysia, current chair of the 10-nation Association of Southeast Asian Nations (ASEAN), of which Thailand is also a member.

Washington is seeking to promote ASEAN unity in the face of China's increasingly aggressive pursuit of territorial claims in the South China Sea, a subject of U.S. criticism.

The U.S. report organizes countries into tiers based on trafficking records: Tier 1 for nations that meet minimum U.S. standards; Tier 2 for those that make significant efforts to do so; Tier 2 "Watch List" for those that deserve special scrutiny; and Tier 3 for countries that fail to fully comply with the minimum U.S. standards and are not making significant efforts to do so.

In its upgrade of Cuba, the report said Havana was making "significant efforts" to comply with the minimum standards for the elimination of trafficking, including sharing data, improving cooperation, and offering services to trafficking victims.

It said there remained reports of forced labor in Cuba's government-backed overseas work missions that send 51,000 workers to more than 67 countries.

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