Charlie Cameron, who has fished the waters of the Muskoka-Haliburton lake country in Ontario for more than 20 years, remembers that the pickerel went first.

Then the lake trout disappeared, and fishermen were soon trading wry jokes about going to the lake to drown worms. "All the finer fish, you just can't catch any," Cameron says ruefully.

This year even the bullfrogs succumbed, and there is an unnatural silence in the cottage-studded woods and along the lakefronts of this famed resort area. But inside those cottages, and in the government buildings of Toronto and the halls of Parliament in Ottawa, there is plenty of vocal anger and resentment. Acid rain is killing fish and frogs in Muskoka lakes and in hundreds of other lakes across eastern Canada and the northeastern United States. The rain is acidified far beyond normal levels by thousands of tons of airborne pollutants from industrial smokestacks.

Acid rain, a relatively new term in the environmental lexicon, is a multibillion-dollar problem -- billions in damage and billions in cleanup costs -- for Canada and the United States. And increasingly, acid rain has brought ominous new dimensions to relations between two traditionally friendly countries.

Scientists here say that as much as 70 percent of Canada's acid rain damage is being caused by pollutants originating in the United States. They point specifically to sulfur dioxide spewing from coal-fired utility plants in the Ohio Valley.

Canada's National Minister of Environment, John Roberts, calls it "the single biggest irritant in U.S.-Canada relations."

"Canadians have a strong identity with their natural environment," says Keith Norton, Roberts' counterpart in Ontario province. "Close identification with a body of water is part of the Canadian psyche."

Officials here acknowledge that more is at stake in this international debate than music of frogs in the cherished Muskoka cottage country. Research increasingly indicates that harmful effects of acid rain also show up in plant life, and its effects on human health are of growing concern.

The growing body of scientific evidence horrifies Canada. The $24 billion-a-year forest products business is its largest industry, directly or indirectly employing more than one in 10 Canadians. The vitality of its lakes and streams and lushness of its forests are crucial to tourism, its second most lucrative industry. Its third biggest industry is commercial fishing, and salmon are disappearing at an alarming rate from Canadian streams and rivers.

A cost-conscious Reagan administration quotes figures no less frightening. "We are talking about an investment of in excess of $100 billion over the next 25 years for a program whose outcome remains uncertain," A. Alan Hill, chairman of the White House Council on Environmental Quality, told a U.S. Chamber of Commerce group last week.

As a solution to the problem, Canada proposes a massive cutback in industrial emissions of both nations. Canada readily acknowledges that its pollutants contribute to acidification of hundreds of lakes in New York, Pennsylvania and other parts of the Northeast. It has moved to cut emissions by 25 percent and promises a similar cut if the United States takes reciprocal action.

Far from rising to the bait, the administration, committed to reducing expensive regulation and promoting new economic growth, has presented a wall of resistance.

Its position, steadfastly defended by the Environmental Protection Agency and the State Department and reaffirmed by Hill last week, is that not enough is known about acid rain to justify the huge expense of Canada's proposal.

More than 3,000 studies have been done in North America and Europe, where Scandinavian countries identified acid rain as a major problem more than a decade ago. There is little scientific disagreement about effects of acid rain or pollutants that cause it, but the White House will not budge.

Until the science is developed, Hill said, "this administration cannot support a further emissions control program."

The problem, as EPA officials express it, is that no one knows precisely what effect, if any, an emissions cutback in one area will have on the lakes of another.

"It's a shot in the dark," says Kathleen Bennett, associate EPA administrator in charge of air pollution. "You can't say there's any reasonable probability of hitting the target."

Canada counters that the Great Lakes Water Quality Agreement, under which the two countries agreed to take action against phosphate pollution in the Great Lakes, was negotiated using far less conclusive research than exists on acid rain.

"If we had waited for science in the case of the Great Lakes," says Ontario's Norton, "we'd have five of the world's biggest cesspools today."

Roberts puts it even more succinctly: "To procrastinate on the basis of a so-called lack of knowledge would be like hesitating to drain a malarial swamp because we didn't know precisely which mosquitoes were carrying the disease."

Canada's sense of urgency partly involves geographic circumstance. The part of Canada receiving the heaviest onslaught of acid rain is the one most vulnerable to damage -- the Canadian Shield, stretching from the Georgian Bay in Ontario to the Ottawa River.

There soil is stretched thinly over ribs of granite left by the retreating glaciers a dozen millennia ago. The natural environment, already highly acidic, has little capacity to buffer the impact of the acid rain.

Aquatic scientists say they do not know how fast the buffering capacity is being lost or whether the damage will be irreversible, but they fear the region could be lost within a decade. When the United States proposes a lengthy program of additional research, Canadians respond that they do not have that much time.

Officials here say the administration's wait-and-see attitude spells almost certain doom for diplomatic negotiations being held under a memorandum of intent signed late in the Carter administration. Canada says the United States has failed to negotiate in good faith under that memorandum, signed Aug. 5, 1980, and worse yet, has reneged on one of the memorandum's key provisions.

The memorandum, in which both countries recognized acid rain as an "important and urgent bilateral problem," called for "vigorous enforcement" of existing anti-pollution laws. But the EPA under Reagan has approved Clean Air Act exemptions that this year allowed legal venting of more than 1 million tons of additional sulfur dioxide.

"That does not appear to be, it is a transgression of an agreement made to us," Roberts says angrily. "I don't think any fair-minded, or even not so fair-minded, person could read that memo and fail to see that limitations were to be applied stringently." The Reagan administration, he said, argues in effect that "the regulations allow exemptions and therefore are being vigorously applied when exemptions are granted."

The last round of negotiations under the memorandum, held in Ottawa last June, showed so little promise that Roberts wonders if they are worth pursuing: "I am not in despair, but I am not optimistic. I'm not sure whether it's very useful for us to continue."

Canada has found more useful an unprecedented, and diplomatically risky, lobbying campaign directed at the branch of government it feels will be most responsive: Congress.

The Canadian Coalition Against Acid Rain, two-thirds funded by government sources, opened a Washington office early last year and started knocking on Capitol Hill doors. The coalition is registered as an agency of a foreign government, although it uses only private funds to run its Washington operation.

The tactic is greeted testily in Foggy Bottom. "This kind of direct involvement in the legislative process is not something we consider very helpful," says Thomas Niles, the State Department official most directly involved in the acid rain negotiations. "We have an idea that it would be intensely counterproductive."

But members of Congress from the Northeast, whose interest in curbing emissions parallels that of Canadians, have responded with bills that could accomplish legislatively what Canada fears it cannot achieve diplomatically.

The key legislation is an acid rain provision included in the rewrite of the Clean Air Act approved by the Senate Environment and Public Works Committee, chaired by Sen. Robert T. Stafford (R-Vt.). That provision would mandate over 12 years a reduction of 8 billion tons in sulfur dioxide and nitrogen oxide emissions in a 31-state area of the eastern United States. It also would require a speedup in acid rain research.

Canada's Parliament praised Stafford and his colleagues, unanimously voting to commend the committee's move "to force action on the urgent problem of acid rain." But the bill's future is uncertain because of heavy resistance by industry, the administration and congressmen from states that would bear the greatest financial burden of emission cutbacks.

Potentially more important, the Canadians have taken their case into the U.S. courts. With the approval of Ottawa, the province of Ontario has intervened in rule-making and legal actions to force states to comply with existing Clean Air Act provisions on interstate pollution.

In the meantime, Canadian officials accuse the administration of acting in bad faith on additional acid rain research, the one measure the White House says it supports.

In an era of budget cuts, Reagan has proposed a 70 percent increase in research funds to study acid rain -- $22 million for fiscal 1983. But Canada says the administration has been cool to recent scientific findings, including a National Academy of Sciences report last year that recommended a 50 percent decrease in acid depositions, and believes the administration has hindered the research process.

The White House rejected a plan to have the National Academy of Sciences and the Royal Society of Canada review research being done by panels under the Memorandum of Intent. Instead, the White House Office of Science and Technology has chosen a group of outside scientists to act as a unilateral "peer review" panel.

The White House environmental adviser said at the time that the earlier NAS report led the administration to wonder "whether an objective review would be done."

Canadian officials see no reason for a separate review but are even more concerned that the panel, with its close White House ties, will be under pressure to make its scientific findings conform with administration policy.

U.S. officials reply that the process has been politicized in Canada, contending that the Canadian government is simply using the issue of acid rain to deflect attention from its more politically divisive economic problems.

Canada, like the United States, is suffering through recession and high unemployment. But Roberts, who holds an elected position, and other Canadian officials deny that domestic politics affect the acid rain controversy.

"It is not a policy that springs from this goverment," said Roberts, noting that his predecessor, John Fraser, a member of an opposition party, has spent nearly as much time speaking on the issue as has Roberts.

"That's like James Watt asking Cecil Andrus to go speak in his behalf," Roberts says.

Miles from the swirling debate at the highest levels of government are frustrated residents of Ontario's lake country. Whatever the genesis of acid rain, they know its results.

The Ontario Department of Natural Resources stocks lakes where Charlie Cameron fishes and, when he catches those fish, he finds blackened roe inside. The fish live long enough to be caught but cannot reproduce. Scientists blame acid rain, and Cameron isn't arguing.

"The United States and Canada could stop it if they wanted to," he complains. "It would cost a few billion dollars, but so what? Why not?"

At Plastic Lake, an inelegantly named dot of water in the Muskoka/Haliburton lake region, scientists are conducting intensive research they hope will help end the scientific controversy. Canadian researchers who work here call Plastic Lake an "intensive care unit," and the visual image suggests that.

Dozens of plastic cylinders strewn through the woods collect rain for analysis in nearby trailer-house laboratories. A recent rain there was found to be more than 10 times as acidic as normal rain.

Needles, bark and other bits of litter are caught in fine screen meshes for testing, and trees are monitored to determine how acidity has affected their growth cycle.

While the stuff of international confrontation drips gently from the leaves and trickles across the forest floor, aquatic scientist Dr. Tom Brydges points out concrete conduits that lead into and out of Plastic Lake. Scientists use them to monitor every possible drop of water that enters or leaves the lake.

Plastic Lake is not dead, but Brydges says it is dying. If the study continues long enough and acid rain keeps falling, evidence gathered will provide material for its obituary.

"You don't see massive destruction," Brydges says. "Things just quietly disappear."