Myanmar called sad and regrettable a move by the United States to place the country on a list of the world's worst human trafficking offenders, while rights groups welcomed it as long overdue.
The demotion came Thursday when the U.S. State Department released its closely watched annual Trafficking in Persons report, which examines 188 governments' efforts in combating modern-day slavery.
It placed Myanmar alongside countries like Iran, North Korea and Syria, and says the Southeast Asian country has failed to meet "the minimum standards for the elimination of trafficking.'' It also removed Thailand from the blacklist despite what the State Department described as widespread forced labor in the country's seafood industry.
The downgrade for Myanmar appeared aimed at sending a message to the country's new democratically elected government, headed by Nobel Peace Prize winner Aung San Suu Kyi, and its still-powerful military to curb use of forced labor, sex trafficking and the recruitment of children as soldiers into the armed forces.
Suu Kyi has been criticized for failing to address widespread persecution of the Rohingya Muslim minority in the Buddhist country.
Her government criticized the demotion as failing to recognize the country's progress.
"We are very sad that we have not been recognized for making positive changes,'' said presidential spokesman Zaw Htay. "In their report, they didn't mention the progress and development we have made for our country.''
Myanmar's Foreign Ministry called the downgrade "regrettable'' and urged the U.S. not to impose restrictions that would hamper U.S.-Myanmar relations.
It also promised to step up efforts to combat trafficking measures. "The issue of human smuggling and trafficking will be addressed vigorously in close cooperation with international partners,'' it said.
President Barack Obama now has 90 days to determine whether to apply sanctions on so-called Tier 3 nations, including Myanmar. But the U.S. often chooses not to, based on its national security interests.
Myanmar had faced a mandatory move up or down the rankings after four years on the watch list.
Human rights groups applauded the downgrade, noting that Myanmar was evaluated mostly on the basis of what was done under the previous army-backed government. Suu Kyi's civilian administration took power in March.
"Myanmar's downgrade is overdue,'' said Matthew Smith of Thailand-based advocacy group Fortify Rights. "The military has long been one of Southeast Asia's worst perpetrators of human trafficking.''
There was disappointment in Yangon, Myanmar's commercial center, since the U.S. action virtually precludes trade privileges that would help jumpstart economic growth after decades of ruinous military rule.
"The government and people have been trying hard for our country,'' said Win Aung, chairman of the Myanmar Chambers of Commerce. "We don't want anything that negatively affects our country's economy and our businesses. We are all putting so much energy in the country's transition period and we want encouragement instead of blame.''
Rights groups also criticized the upgrade of Thailand, which was removed from the bottom-rung Tier 3 category and placed on the Tier 2 watch list.
Labor abuses in the Thai seafood industry gained in prominence around the globe after a two-year investigation by The Associated Press that led to the freeing of more than 2,000 slaves and the arrest of more than a dozen alleged traffickers. Several have been convicted.
"2015 was an historically bad year for human trafficking in Thailand,'' Fortify Rights said in its statement, calling the upgrade premature.
Thailand's Foreign Minister Don Pramudwinai said the government was happy to see its efforts rewarded and planned to work harder.
"We are pleased today that all the efforts of the past year culminated into a certain degree of success,'' he told a news conference Friday. "I'm determined to work vigorously in order to rid the country of this modern slavery.''