It is considered one of the most exploitative industries in the world. In Uzbekistan, gangs forcibly remove hundreds of thousands of children from schools, order them to pick cotton in the searing heat and live in squalid conditions on pitiful wages.

Blended by manufacturers thousands of miles away, Uzbeki state-controlled cotton is sold to the world's biggest retailers, making the repressive regime the third biggest exporter of "white gold" and earning the government $1bn.

But, in what has been described as a major breakthrough, a decision by some of the world's biggest clothing businesses has forced the Uzbeki government in recent weeks to sign International Labour Organisation conventions that commit the country to stop using child labour in its state-sponsored industry.

Retailers that have pulled out of the central Asian state include Tesco, Asda Wal-Mart, Marks & Spencer and Gap.

Steve Trent, director of the Environmental Justice Foundation (EJF), said: "This is a major step forward. Virtually nothing persuaded the government to change course. But the actions of retailers and campaigners are definitely now having an impact. But the key question that remains is whether the Uzbeki government will implement the conventions. They need to allow independent monitoring and work with civil society, which are basic requirements of the conventions they have signed up to and ratified. They are not doing this so the jury is out."

This week a conference held in London jointly by the Ethical Trade Initiative and Tesco will invite overseas retailers to withdraw from Uzbekistan to force the government to move faster.

"We became aware of real problems in Uzbekistan," said Alan Wragg, Tesco's clothing technical director. "Government-organised forced child labour literally forced kids out of school into vans. It's awful. The fact that its industry is sponsored by the government and there's 40% unemployed in the country makes it worse. So when we became aware of this, we told our suppliers not to use Uzbeki cotton in the supply chain."

Until recently that was not easy because most cotton garments are blended from a number of different countries and it was hard to work out where cotton was sourced. But new technology developed by Oxford-based firm Historic Futures now offers retailers the ability to track and trace all items that make up a garment. By uploading receipts on individual components within entire supply chains onto a secure network, retailers can accurately trace where their products come from.

Tesco claims to be the first UK retailer to use this system to trace whether cotton comes from Uzbekistan. Gap also now uses the technology, which can be used by any industry.

In 1991 Uzbekistan emerged as a sovereign country after more than a century of Russian rule. Uzbekistan has the largest armed forces and is the most populated country in central Asia. The media is tightly controlled by the state. A UN report has described the use of torture as "systematic".

The country has been denied cash from international financial institutions because of its authoritarian nature, but former US president George Bush started funding the uncompromising president Karimov after the country allowed US planes to stop there in the run-up to the Afghanistan invasion.

But journalists and campaigners exposing abuses in the Uzbeki cotton industry have been harassed and arrested. A report this week by the EJF appeared to prove that the situation is as dire as ever, leading to calls for concerted action by retailers.

It is alleged that children are taken from their homes in the autumn to harvest cotton and prepare the fields for sowing and weeding the plants. According to a range of authoritative campaigners and journalists including the BBC, children work up to 11 hours without protective clothing, adequate rest or water leading many to suffer heat stroke.

The Uzbeki government disputes that its cotton industry sponsors forced child labour, saying that this claim has been spread by cotton-producing countries that are losing market share. It adds that its monitors ensures the best international standards are adhered to.

• Moves by retailers to pull out of Uzbekistan contrasts with the seemingly intractable situation in Burma which took a turn for the worse in recent days with the trial of the country's democratically elected leader Aung San Suu Kyi.

The London insurance market plays a key role in providing cover for the repressive military junta's port and aviation interests. Without insurance, campaigners say, the junta would be starved of cash and so be more likely to embrace the international community.