WASHINGTON (Reuters) - Four U.S. senators unveiled a long-awaited bill on Wednesday aimed at forcing China to more quickly raise the value of its currency by giving the U.S. Treasury Department new tools to pressure Beijing.

The legislation, which does not mention China or any other country by name, sets out a series of actions that increase in severity over time.

Ultimately, a country identified by the United States as having a "fundamentally misaligned" currency could face legal action at the World Trade Organization and coordinated currency intervention by the Federal Reserve and other central banks, according to a summary of the bill.

The legislation was crafted by Senate Finance Committee Chairman Max Baucus, a Montana Democrat; Sen. Charles Grassley, an Iowa Republican; Sen. Charles Schumer, a New York Democrat, and Sen. Lindsey Graham, a South Carolina Republican, who pledged last year a tough bill to pressure China without violating WTO rules.

"This breakthrough proposal is like nothing else because it's tough, wide-reaching and WTO-compliant," Schumer said in a statement.

The final package borrows elements of a bill Baucus and Grassley introduced last year as an alternative to a Graham-Schumer proposal, which was opposed by the Bush administration and many business groups. That bill threatened China with a 27.5 percent tariff on its exports to the United States over the currency concerns.

"The previous legislation got China's attention; the purpose of this legislation is to force change," Schumer said.

Many U.S. lawmakers believe China deliberately undervalues its currency by 15 percent to 40 percent to give its companies an unfair price advantage in international trade.

The currency issue embodies larger U.S. concerns about the trade deficit with China, which widened to a record $233 billion in 2006 and could exceed that this year.

Earlier on Wednesday, the Treasury Department stopped short of formally labeling China a currency manipulator in its semiannual currency report. But it did say that China's currency was "undervalued," and urged Beijing to move faster toward a more flexible, market-determined exchange rate.

The bill requires Treasury to develop a new report that identifies two categories of "fundamentally misaligned currencies." Those misaligned by clear government action would be targeted for priority action by the United States, while others would face less intense pressure for reform.

For any country labeled as a priority country, Treasury would be required to immediately seek advice from the International Monetary Fund and key trading partners on how best to address the issue.

Treasury also would be required to oppose any favorable change in IMF governance practices for a targeted country, while the Commerce Department would have to take the targeted country's currency practices into consideration when deciding whether it qualifies as a "market economy" under U.S. anti-dumping laws.

China has asked to be considered a market economy believing that would lead to lower U.S. anti-dumping duties. Penalties increase if a targeted country has failed to adopt "appropriate policies" after six months.

The Commerce Department would be required to include the degree of currency undervaluation in its calculation of anti-dumping duties on the targeted country.

The country would also be denied access to the U.S. government procurement market, unless it is a member of the WTO's government procurement agreement. China is currently not a member of that pact.

Treasury also is instructed after six months to request the International Monetary Fund to engage in consultations with the targeted country on the currency issue.

After one year, the U.S. Trade Representative's office would be required to initiate a currency case at the WTO.

The Treasury Department also would be required to consult with the Federal Reserve and other central banks on possible "remedial intervention in currency markets" against the targeted country, according to the bill summary.

The legislation allows the president to waive penalties that kick in after six months if he decides they would harm U.S. national security or economic interest. However, Congress would be given a chance to overrule that decision.

Treasury also would be required to consult with senior members of the Senate Finance Committee and the House of Representatives Ways and Means Committee in developing its currency report.