By Amanda Becker
CEDAR FALLS, IOWA (Reuters) - Democratic U.S. presidential contender Hillary Clinton clashed with the White House on Tuesday saying she wants any trade legislation to address concerns over "currency manipulation," dealing a damaging blow to one of President Barack Obama's key policies for his second term.
Soon after Clinton spoke on the campaign trail in Iowa, Treasury Secretary Jack Lew issued a statement saying the administration would not support proposals that would retaliate against countries judged to be lowering the value of their currency in an amendment to the Trade Promotion Authority (TPA) bill that is before the Senate.
Trade has emerged as a divisive issue for Democrats, pitting Obama against some members of his caucus, including leading liberal, Massachusetts Senator Elizabeth Warren.
Tuesday was the first time Clinton, the leading Democratic presidential contender, has made any substantial statement on the issue.
Her intervention could strengthen Democratic opposition to a 12-nation Asia Pacific Trade deal that is part of Obama's diplomatic pivot to Asia and one of the centerpieces 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," she said.
The Senate is to vote this week on the fast-track measure that will move Obama closer to enacting the Trans-Pacific Partnership, a trade deal covering 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 including a currency amendment in the TPA say that 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.
At present there is a separate bill on currency manipulation, which if it passes would likely be vetoed by Obama.
Critics charge that the legislation, originally aimed at introducing duties to punish China's undervalued yuan currency in 2003, 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 needed to ensure strong employment and a healthy robust economy, an outcome we would find unacceptable," Lew said in a statement.
Clinton, who has been 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 to 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.
(Reporting by Amanda Becker; Additional reporting by Jason Lange in Washington; Writing by David Chance; Editing by Alan Crosby, David Gregorio and Andrea Ricci)