Yesterday, about 40 retired and disabled workers from a church-supported group called the Carolina Brown-Lung Association demonstrated outside the 17th Street N.W. textile industry building, carrying hand-lettered signs that read "Burlington Took My Breath Away," referring to the North and South Carolina factories they worked in.

"Tens of thousands of southern textile workers are afflicted with brown lung disease," said the group's chairman, A.J. Wood, a retired textiles worker.

Although brown lung-the shorthand name for a disease called bysinesis-was first discovered among European textile workers in the 18th century, only in the last decade have American officials and industry spokesman acknowledged the problem here.

OSHA estimates that roughly 230,000 textile mill workers are exposed to cotton dust levels that could cause brown lung. More than 70 per cent work in North and South Carlina mills. Fewer than 40 per cent are unionized.

Estimates vary on how many of these workers have contracted the disease or died from it. Dr. Arend Bouhuys, at Yale University's Lung Research Center, has estimated that as many as 17,000 workers are disabled by byssinosis, which can reduce lung capacity by 75 per cent.

However, the textile instituted, which represents most of the nation's cotton mills, says about one per cent of cotton workers "have a reaction to cotton dust," according to Secretary-Treasurer F. Sadler Love.

"The problem is grossly exaggerated," he said "There has not been a known death from byssinosis. There are no autopsy findings that prove the existence of byssinosis in an individual. There are subjective symptoms which the patients express that sometimes result from bronchitis, emphysema or excessive smoking."

When OSHA was established in 1977, it adopted limiting cotton dust per cubic meter of air. Critics charge, the Nixon administration delayed settin a final standard because of campaign contributions from the textile industry. Now, however, with mounting medical evidence, of widespread byssinosis, the agency proposes a more restrictive standard, which industry would have seven years to meet.

Love cited a study by Research Triange Park, a North Carolina group under contract to OSHA, which estimated such a standard would cost industry$2.7 billion in new machinery and operational costs. The brown lung association says that estimate includes machinery that industry is buying anyway to modernize plants.

A major problem for cotton dust victims is that state compensaion laws in North South Carolina make it difficult to get settlements from employer.

Malone and other workers met yesterday with members of Congress from North and South Carolina who said they will introduce bills to establish federal compensation from brown lung-much like black lung disease from coal dust is federally compensated. A bill now pending in the House would compensate byssinosis victims from a tax on cotton.