The Senate launched a debate on Wednesday on the most sweeping proposals to reform US immigration laws in two decades, but divisions within the majority Republican party pose a huge obstacle to approval of the legislation in an election year.

Immigration reform, which President George W. Bush has been seeking for more than two years, has exposed disagreements among conservatives over whether low-wage immigrants should be seen as a boon to the economy or a threat to American workers and a drain on government coffers.

In an unusual procedural move, the Senate will debate two different bills that reflect both sides of that debate. Bill Frist, the Senate Republican leader who is trying to position himself for a presidential run in 2008, has offered legislation that would tighten border security and increase penalties on US employers who hire illegal immigrants but would not increase the annual quota of legal migrants.

That approach is popular in the US, and among Republicans. Recent polls have found that as many as 70 per cent of voters say they favour candidates who pledge to get tougher on illegal immigration.

But Mr Frist has tried at the same time not to alienate Hispanic voters, who are an increasingly important Republican constituency, telling a group of Hispanic educators this week that “this nation was made great by men and women who longed for a better life and came to America to find it”.

As a result, he has pledged to allow a vote that could replace his bill with radically different legislation that is favoured by many Democrats and by Senator John McCain, who is likely to be one of Mr Frist’s chief rivals in the 2008 Republican presidential primary.

That legislation, approved on Monday by the Senate judiciary committee with the support of just four Republicans, would allow as many as 400,000 new workers to come to the US legally each year. The bill would also provide a path for some 11m immigrants who are already in the country illegally to acquire legal status and eventual citizenship after paying fines and facing long delays.

Many conservative groups have denounced it as “amnesty” for illegal aliens, but US business groups, a core Republican constituency, say there is broad demand for unskilled and semi-skilled labour that cannot be filled by US citizens.

Mr McCain insisted on Wednesday that the bill “is not amnesty. It’s earned citizenship.” He said that while the US needs to tighten border security, “we’ve got to fix this problem of 11m people that are living in the shadows.”

Congressional failure to enact any legislation, or a victory by Republican opponents of increased immigration, would also be a diplomatic embarrassment to Mr Bush. The president left Washington on Wednesday afternoon for a meeting in Cancún with Vicente Fox, the Mexican president, who has been urging the US to reform its immigration laws since Mr Bush took office in 2001.