WASHINGTON One of the most sterile political arguments of recent years has been the almost theological schism over whether labor and environmental standards should be included in future trade agreements. The dispute has divided rich and poor countries, and the rich among themselves. . Failure to resolve the argument has fueled protests against globalization, and created a damaging stalemate in Washington that helped to undercut U.S. world trade leadership during former President Bill Clinton's second term. The deadlock must somehow be broken if President George W. Bush is to pursue his trade policies effectively. . A breakthrough, however, looks even less likely with the Democrats taking control of the Senate. Party leaders are already indicating that they will treat Mr. Bush's free-trade initiatives less urgently than their Republican predecessors. . Most Democrats, with the support of environmentalists and labor unions, continue to want trade agreements to include labor and environmental requirements, backed by the threat of trade sanctions. Most Republicans reject such proposals as a cover for both protectionism and a left-wing social agenda. . Robert Zoellick, the U.S. trade representative, has gained some support for the idea of substituting fines for trade sanctions, as already envisaged in some trade agreements. But the search for a solution has been marked by a dearth of "outside-the-box" thinking. In that intellectual vacuum, support is growing, at least in academic circles, for a proposal that would radically alter the terms of the debate. The plan is to create a new Global Environment Organization to take its place alongside the World Trade Organization and the International Labor Organization in Geneva. . Opponents of labor and environmental provisions in trade pacts might be expected to recoil instinctively at the thought of another international bureaucracy, particularly one ostensibly devoted to promoting "green" causes. But the counterintuitive implication of the proposal is that it might actually help to disentangle green issues from trade policy, and weaken the case for penalizing environmental offenders with trade sanctions. . According to C. Ford Runge of the University of Minnesota, a proponent of the idea, "some Republicans have recently argued that business might favor moving environmental issues into a separate body," relieving the WTO of an environmental role it is neither willing nor able to play. . Critics have battered the WTO's image by alleging that it gives trade priority over protection of the environment - refusing, for instance, to endorse trade sanctions against countries that endanger creatures like dolphins and turtles when catching tuna and shrimp. . One of the main reasons underlying demands for green trade sanctions in the WTO is simply that there is no comparable world body dealing with environmental issues. The WTO is being asked to play a role for which it was not designed. As economists might argue under the principle of matching instruments to targets, it would be more effective to use environmental policy to achieve environmental objectives and trade policy to achieve trade objectives. Similarly, labor policy objectives could be handled by the ILO. . Not all environmental issues have to do with trade, nor does the environment necessarily have to be policed by trade measures. As Mr. Runge said at a conference in Washington last week, the Global Environment Organization could impose fines, suspend members' voting rights or impose other non-trade penalties. It could also assume the running of proliferating multilateral environmental agreements, such as those covering protection of the ozone layer and endangered species, and generally work to promote higher environmental standards that do the least damage to trade. . Among the fiercest opponents would be developing countries, who would undoubtedly see the new environmental organization as another means of sabotaging their competitive advantage by forcing them to adopt unwanted and expensive environmental regulations. It would be essential to respond to those anxieties by offering the developing countries better access to industrial-country markets, and other economic concessions, in return for their agreement to the Global Environment Organization. . An aim of the environmental group would be to co-opt environmental activists into the negotiating process. It would show they could work toward their objectives without burdening trade pacts with potentially protectionist provisions that free traders and developing countries find so objectionable. . E-mail address: Thinkahead at iht.com