By Amanda Becker
CEDAR FALLS, IOWA (Reuters) - Democratic U.S. presidential contender Hillary Clinton set up a potential clash over sensitive trade legislation with the White House on Tuesday, urging steps to prevent currency manipulation and lawsuits by foreign companies against governments.
The White House also ratcheted up pressure on lawmakers, threatening to veto legislation that could help seal a Pacific trade pact if Congress forced sanctions against trading partners who artificially weaken their currencies.
The Trans Pacific Partnership (TPP) has pitted Obama against some fellow Democrats, including leading liberal, Massachusetts Senator Elizabeth Warren.
Clinton, the leading Democratic presidential contender, made her first substantial statement on the issue on Tuesday. Her intervention could strengthen Democratic opposition to the deal, which is part of Obama's diplomatic pivot to Asia and a centerpiece of his second-term legislative agenda.
"It needs to try to address directly or indirectly the manipulation of currency by countries that would be trade partners," Clinton said at a roundtable during a campaign stop in Iowa.
"That's been a big source of us not being as competitive as we want to be."
Clinton also said rules allowing companies to sue foreign governments over health, environmental and other policies, which would be part of the TPP, were "a problem," echoing concerns raised by Warren.
Obama is trying to build support in Congress for the TPP and Treasury Secretary Jack Lew said in a letter to senators that U.S. officials are reaching out to TPP partners to establish "new approaches to addressing unfair currency practices."
The Senate is to vote this week on the measure to streamline trade talks that will move Obama closer to enacting the TPP, which would cover 40 percent of the global economy that is seen as a counterbalance to China's rising economic and diplomatic clout.
If fast-track authority is granted to the White House, then Congress must vote yes or no on any trade deal that is negotiated, without the chance to make any amendments.
Supporters of sanctions against currency cheating say many trading partners in Asia such as Japan, Singapore, Malaysia and Vietnam run substantial trade surpluses with the U.S. that may be a result of undervalued currencies.
The administration argues that approach would lay the United States open to charges that Federal Reserve policies were aimed at reducing the value of the dollar.
"An enforceable currency provision in our trade agreements could give our trading partners the power to challenge legitimate U.S. monetary policies," Lew said in the letter. Lew and a White House spokesman warned that Obama might veto a bill that included enforceable currency provisions.
Clinton, under pressure from the party's left wing to take a definitive stand on the TPP, said she wanted to see what amendments to trade legislation were adopted in the Senate before deciding whether to throw her support behind the Asia Pacific deal.
"I want to judge the final agreement," Clinton said. "I have been for trade agreements, I have been against trade agreements. I try to make the evaluation on what I thought they would produce."
Clinton made the comments during her second visit to Iowa, the state that kicks off the presidential nominating battle in early 2016.