Obama will announce during a campaign tour of Ohio on Monday that he is initiating a case against China at the World Trade Organization over allegedly illegal subsidies for automobiles and auto parts, the official said.

The move allows Obama to take a stand on China and advance the interests of a major job-providing industry in a state that could tip the balance in a close election. His opponent, Mitt Romney, has attacked Obama for what he says is an overly cautious approach to pressuring China into observing international norms for trade, foreign exchange, and patents and trademarks.

Ohio relies heavily on the auto industry and is a politically important swing state.

"The key principle at stake is that China must play by the rules of the global trading system," the official said. "When it does not, the Obama administration will take action to ensure that American businesses and workers are competing on a level playing field."

Obama has said Beijing is abusing trade laws by imposing more than $3 billion in duties on U.S. auto exports. In addition to launching the subsidies case, the president is taking the next formal step in the World Trade Organization to protest those duties, the official said.

The trade enforcement steps come as Obama and Romney vie for a few important states, including Ohio, that could determine the outcome of the November 6 presidential election. Obama holds a narrow lead in polls, but the sluggish economy and unemployment rate have weighed on the president's re-election bid.

In recent days, Obama's handling of foreign affairs has jumped to the forefront of the campaign debate as tensions boil over in the Middle East. China trade case may shift the focus to the president's management of the sometimes contentious U.S. relationship with China and his support for the auto industry, which faced the prospect of auto maker bankruptcies in the depths of the financial crisis and recession.

Romney has accused Obama of making too many concessions to the Asian powerhouse and has promised to be tougher on issues such as trade and currency manipulation. The Obama campaign has frequently stated that, during his business career, Romney was responsible for sending many U.S. jobs overseas, including to China.

In Ohio, the auto-parts industry directly employs 54,200 people, the administration official said. When related industries like steel, aluminum, plastics and electronics are taken into account, the auto sector supports about 12.4 percent of the state's total employment, the official added.

Obama constantly reminds Ohio audiences of his administration's decision to throw a lifeline to auto companies during the recession and Romney's opposition to that bailout.

Beijing's willingness to hold the value of its yuan currency low, making its goods cheap abroad, has been a sore point between the United States and China. As a result of U.S.-led international pressure, China has let the yuan appreciate in recent years.

Even so, the U.S. trade deficit with China hit a record $295 billion in 2011.

Romney has pledged to formally declare China a currency manipulator on his first day in office. The Obama administration has declined to label China in seven semi-annual Treasury Department reports.

Administration officials say they have made progress with China on the currency issue over the past few years without ratcheting up tensions by formally labeling Beijing a currency manipulator. The next semi-annual report is due on Oct 15.

In the meantime, Beijing showed no such reticence to invoke trade rules, slapping duties on U.S. auto exports in December 2011 on roughly 92,000 autos and SUVs, worth $3.3 billion in annual U.S. exports.

Those duties fell disproportionately on General Motors and Chrysler because of the actions that President Obama took to support the U.S. auto industry during the financial crisis.

The trade duties cover more than 80 percent of U.S. auto exports to China, including cars manufactured in Toledo and Marysville, Ohio, and Detroit and Lansing, Michigan.

In making their case to the world trade body in Geneva, Switzerland, U.S. officials say the Chinese government is providing prohibited subsidies to auto and auto parts producers in 12 designated "export bases." Illegal subsidies were worth $1 billion between 2009 and 2011, the administration official said.

(Reporting By Jeff Mason and Mark Felsenthal; Editing by Christopher Wilson and Stacey Joyce)

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