The United States is upgrading Malaysia from the lowest tier on its list of worst human trafficking centres, U.S. sources said on Wednesday, a move that could smooth the way for an ambitious U.S.-led free-trade deal with the Southeast Asian nation and 11 other countries.
The upgrade to so-called "Tier 2 Watch List" status removes a potential barrier to President Barack Obama's signature global trade deal.
A provision in a related trade bill passed by Congress last month barred from fast-tracked trade deals Malaysia and other countries that earn the worst U.S. human trafficking ranking in the eyes of the U.S. State Department.
The upgrade follows international scrutiny and outcry over Malaysian efforts to combat human trafficking after the discovery this year of scores of graves in people-smuggling camps near its northern border with Thailand.
The State Department last year downgraded Malaysia in its annual "Trafficking in Persons" report to Tier 3, alongside North Korea, Syria and Zimbabwe, citing "limited efforts to improve its flawed victim protection regime" and other problems.
But a congressional source with knowledge of the decision told Reuters the administration had approved the upgraded status. A second source familiar with the matter confirmed the decision.
Some U.S. lawmakers and human-rights advocates had expected Malaysia to remain on Tier 3 this year given its slow pace of convictions in human-trafficking cases and pervasive trafficking in industries such as electronics and palm oil.
This year's full State Department report, including details on each country's efforts to combat human trafficking, is expected to be released next week.
State Department spokesman John Kirby said the report was still being finalised and that "it would be premature to speculate on any particular outcome."
Obama visited Malaysia in April 2014 to cement economic and security ties. Malaysia is the current chair of the 10-nation Association of Southeast Asian Nations. It is seeking to promote unity within the bloc in the face of China's increasingly assertive pursuits of territorial claims in the South China Sea, an object of U.S. criticism.
In May, just as Obama's drive to win "fast-track" trade negotiating authority for his trade deal entered its most sensitive stage in the U.S. Congress, Malaysian police announced the discovery of 139 graves in jungle camps used by suspected smugglers and traffickers of Rohingya Muslims from Myanmar.
Malaysia hopes to be a signatory to Obama's legacy-defining Trans-Pacific Partnership (TPP), which would link a dozen countries, cover 40 percent of the world economy and form a central element of his strategic shift towards Asia.
On June 29, Obama signed into law legislation giving him "fast-track" power to push ahead on the deal.