(Reuters)

The State Department on Tuesday listed China as one of the countries with the worst records on sex trafficking and forced labor, a downgraded designation that Beijing labeled irresponsible and which could complicate Washington’s efforts to further isolate North Korea over its nuclear weapons.

China was dropped one notch on a watch list to Tier 3, the lowest ranking, in the State Department’s annual human trafficking report. The report said China had made no meaningful efforts to curb forced labor and human trafficking, and suggested the country had backslid by decreasing law enforcement efforts. Tier 3 is reserved for countries deemed not to meet minimum standards. Theoretically, the rating could result in sanctions, although presidents often waive that step.

In remarks introducing the report, Secretary of State Rex Tillerson said China’s downgrade was partly due to its use of North Korean workers whose salaries are remitted directly to the government in Pyongyang. He said North Korea earns hundreds of millions of dollars a year in hard currency, despite international sanctions, from the earnings of 50,000 to 80,000 laborers forced to work overseas in mining, construction and food services. Most work either in Russia or China, he said.

“Responsible nations simply cannot allow this to go on,” Tillerson said. “We call on any nation that is hosting workers from North Korea in a forced labor arrangement to send those people home.”

Tillerson said one reason for China’s downgrade in this year’s report was “because it has not taken serious steps in its own complicity in trafficking, including forced labor from North Korea.”

China took umbrage at being lumped in the same category as North Korea and Syria. Foreign Ministry spokesman Lu Kang said the United States was applying its own laws to China. He defended his country’s efforts to combat trafficking and forced labor as “obvious for everyone to see.”

“As we have said repeatedly, no country has the right to speak irresponsibly on China’s domestic affairs,” Lu told reporters in Beijing.

Rep. Christopher H. Smith (R-N.J.), who wrote the legislation that created the report 17 years ago, praised Tillerson for putting China on the spot. Smith said in a statement that the secretary of state “deserves the gratitude of victims and human rights defenders, calling out the Chinese government’s deplorable record and complicity in the cruelty of the sex and labor trafficking problem.”

Tillerson’s personal appearance at the report’s unveiling was striking because he skipped the public rollout of the department’s annual human rights report in March, a move that invited criticism. In contrast, the human trafficking report was made public under chandeliers in a large, glitzy room where official dinners are held. It was attended by Tillerson’s newly confirmed deputy, John Sullivan, and several members of Congress, including Sen. Bob Corker (R-Tenn.), chairman of the Senate Foreign Relations Committee.

Also present was Ivanka Trump, who has hosted a White House roundtable on fighting human trafficking and met in Rome with African women who were trafficked into prostitution. The president’s daughter and adviser has a fashion line with many items made in China. This month, the State Department called for China to release three labor activists who were arrested while investigating conditions at factories that manufacture Ivanka Trump-branded shoes.

She called human trafficking a “pervasive human rights” issue that enslaves an estimated 20 million people around the world, including in the United States, and called for it to be eliminated.

Like the annual human rights report, the human trafficking report is the result of a year’s work by State Department employees in embassies around the world. The period covered runs a little more than two months into the Trump administration.

Even before its release, the report was criticized for removing Iraq and Burma from a list of countries whose governments use child soldiers. Burma, also called Myanmar, was upgraded to the Tier 2 watch list. The report said the country has made progress in ending the recruitment and use of child soldiers and has prosecuted government officials for human trafficking.

Human Rights Watch said Burma did not deserve to be upgraded because the use of child soldiers continues.

Although Iraq was removed from a list of countries where children are pressed into service as soldiers, it was downgraded overall to the Tier 2 watch list. The report praised Iraq’s efforts to pay compensation to people who were freed after being captured and exploited by the Islamic State. But it criticized the government for punishing some victims for crimes they were drawn into as a result of being trafficked, such as prostitution, while failing to prosecute their recruiters.

The report also kept Thailand on the Tier 2 watch list for the second year in a row. It said the government was investigating and prosecuting people complicit in forced labor in the fishing industry but criticized its record prosecuting corrupt officials complicit in trafficking.

David Abramowitz, the managing director of Humanity United, a group that tackles global problems, said that new laws passed in Thailand have had little impact and that there has been little change observed in the field.

But Boom Mosby, an advocate for child victims of sexual abuse in Thailand who was honored for her work, said she has seen significant progress in policy and law enforcement in recent years. She said police are working to combat child pornography and arrest foreign sexual predators who come to Thailand for what is known as sexual tourism.

“I see law enforcement being much more proactive,” she said.