(Adds details and background)

By Doug Palmer

WASHINGTON, Dec 18 (Reuters) - President-elect Barack Obama will nominate former Dallas Mayor Ron Kirk to be U.S. trade representative, a Democratic official and another source familiar with decision said on Thursday.

Obama is expected to make the announcement on Friday in Chicago before leaving for a Christmas vacation in Hawaii.

Kirk, a partner in the Dallas office of the law firm Vinson and Elkins, has acknowledged having talks with Obama's transition team about a job in the new administration.

The Dallas Morning News reported on Thursday that Kirk had been calling friends to tell them he had the job.

Obama turned to Kirk, who is little known in Washington trade circles, after his first choice Rep. Xavier Becerra, a California Democrat and member of the House of Representatives Ways and Means Committee, turned down the job.

"My concern is how much weight this position would have had, and I reached the conclusion that it would not be a top priority or even a second or third priority," Becerra told La Opinion, a Los Angeles Spanish-language newspaper, in an interview earlier this week.

Becerra's comment increased already strong U.S. business concerns that long-time trade priorities like finishing the Doha round of world trade talks would be put on the back burner while Obama and Congress focus on restoring U.S. economic health and other domestic concerns.

Obama has already indicated that winning approval of two pending free trade agreements with Colombia and South Korea will not be top agenda items.

Kirk introduced Dallas Federal Bank Reserve President Richard Fisher at a speech on Thursday in Dallas. Afterward, Fisher told reporters Kirk had "all the right skills" to be an effective U.S. trade representative.

"He's a magnificent personality and he's a lot of fun, which is really important; to really be the go-between Congress and the president," said Fisher, who was a deputy U.S. trade representative under President Bill Clinton.

One of Kirk's first challenges, if approved by the Senate, would be to make good on Obama's promise to add stronger labor and environmental provisions to the North American Free Trade Agreement, a pact often blamed by labor groups for moving U.S. jobs to Mexico.

Obama has also promised to get tough on China's currency practices and to beef up U.S. trade enforcement to make sure other countries are playing by the rules.

Business groups were anxious to learn if the job of U.S. trade representative would remain a Cabinet-level post or be downgraded by Obama to a lower-tier job.

Kirk was the first black mayor of Dallas from 1995 until 2001, when he launched an unsuccessful bid for the U.S. Senate. He lost the contest for an open seat to current Sen. John Cornyn, a Republican.

Although Kirk doesn't bring obvious trade credentials to the job, that may not matter much, a former top Commerce Department official said.

"What's important about the job is the ability to negotiate and make a deal and politicians tend to be pretty good at that," said Bill Reinsch, president of the National Foreign Trade Council.

Kirk supported Obama over Hillary Clinton during the intense Democratic party nomination battle, telling CBS News a few days before the March 5 Texas primary that Clinton was too divisive a figure to govern effectively.

He was an aide to Sen. Lloyd Bentsen during the 1980s and followed Bentsen to the Treasury Department, when Clinton tapped the Texas Democrat as his first Treasury secretary.

(Additional reporting by Caren Bohan in Chicago and Alister Bull in Dallas; Editing by David Wiessler)

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