Westalke can play in the centre or on the left and is highly rated at Ipswich where he won the player of the season award a couple of years ago.
Blues chief executive Derek Bowden confirmed the clubs have agreed the terms of the swap, but said the players are yet to follow suit.
"Both players have yet to agree personal terms," he told the club's official website.
Harding, 22, joined the Whites from Brighton last summer but has found first-team opportunities hard to come by making only 20 appearances in his debut season at Elland Road.
Westlake has made more than 100 league appearances for the Tractor Boys since coming through the youth ranks and scored 16 goals.