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Obama To Create Group To Fight Trade Deficit

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* USTR Kirk to select director of new interagency team

* Unit will draw on resources from across government

* Reports raise alarm on China's industrial policies

By Doug Palmer

WASHINGTON, Feb 28 (Reuters) - President Barack Obama, following through on a promise to beef up enforcement of trade agreements, on Tuesday will sign an executive order creating a new government team to make sure China and others play by the rules, the White House said.

The move comes as Obama has faced criticism from Republican presidential candidate Mitt Romney over his handling of China and the U.S. trade deficit with the world's second largest economy has soared to record $295.5 billion in 2011.

In addition, two new reports on Tuesday raise concerns about state-supported competition from China and call for the United States to take a variety of steps to respond.

Obama outlined his plan to create a new Interagency Trade Enforcement Unit (ITEC) in his annual State of the Union speech last month to Congress.

He took particular aim at China, which he accused of lavishing subsidies on its companies and not doing enough to stop counterfeiting of American goods.

The White House earlier this month proposed spending $26 million dollars to hire 50 to 60 new people to help crack down on unfair foreign trade practices.

The executive order to be signed on Tuesday directs U.S. Trade Representative Ron Kirk to select a director to lead the new unit, with a deputy director chosen by U.S. Commerce Secretary John Bryson.

"The ITEC will be supported by the Departments of Agriculture, Homeland Security, Justice, State and the Treasury, as well as the Intelligence Community," a White House official said.

Romney, who has struggled recently to hold onto his front-runner status in Republican presidential primaries, has criticized Obama for not doing more to "crack down on China for stealing jobs" and promised to get tough with China over its currency practices if elected president.

The Information Technology & Innovation Foundation, a Washington think tank, in a new report on Tuesday accused China of using currency manipulation, subsidies, tariffs, forced technology transfers, export restrictions, standard setting and other policies to gain an "absolute advantage" for its companies in a wide array of industries.

"While virtually all governments have crafted economic development policies to boost competitive advantage, China has developed the most comprehensive set of policies, with most of them violating the spirit, if not the letter of the law of the WTO," the report said. "It's time to say 'enough is enough'."

It recommended overcoming the concern many companies have that filing a WTO case will trigger Chinese retaliation "by making it national policy that USTR will bring cases whenever U.S. interests are being hurt through trade rule violations, even if U.S. companies don't want them to proceed."

It also called for a tax credit to help companies pay for WTO cases and urged the United States to "build a global free-trade coalition" with the European Union, Canada, Australia, Japan and others to push back against China.

A second report by the office of Senator Ron Wyden warned that the United States is "losing the environmental goods economy to China" because of Beijing's aggressive push to promote its wind, solar and other renewable technology sectors.

"The (global trading) system breaks down when the world's participants fail to abide by its rules. That is especially true when the country that appears to be breaking the rules has the world's second largest economy," Wyden's office said.

Along with tougher enforcement of trade agreements, the United States needs vigorous government polices to support production of environmentally friendly goods, the report said.

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