Fire retardants are everywhere! Car seats, even children pijamas. Not sure why people thought it was a good idea to put chemicals on children
Children can be very heavy sleepers and not hear smoke alarms, and even if they do wake up, they might have a harder time getting out of a burning building than adults, so having a bit extra time because their clothes didn't catch fire would be helpful.
Seems like a good idea, until you consider the negatives of the fire retardants, and then you have a complex decision to make.
The problem is that companies introducing chemicals into a clothing product aren't required to show that they're safe, at least in the US. So considering the negatives only happens much later, if at all.