Wade Chatman and Baxter Penney say they will never forget the slaughter that took place last winter when a pack of harp seals happened to swim by this gentle harbor on Newfoundland's picturesque northeast coast. It was not the seals, however, that were the victims.

"We saw 'em with our own eyes," said Penney, recalling how the marauding seals surrounded a school of prized northern cod, corralling them into the shallow waters at the end the cove and forcing hundreds to beach themselves on the rocky shore. Then, lustily, methodically, the seals set about their blood-thirsty task, swallowing the small fish whole and gorging themselves on the protein-rich bellies and livers of the adults.

"When they was finished, the beach there was just covered with cod," said Chatman.

That story, or others like it, is repeated up and down the Bonavista Peninsula these days, where residents are convinced that an overabundance of seals is killing what is left of the depleted cod fishery--and with it the lifeblood of hundreds of their once-thriving fishing towns.

Now, a proposal from the Newfoundland government to permit the killing of up to 2 million seals in next winter's hunt threatens to cause an international backlash by environmentalists and animal rights groups who have vowed to come to the defense of the cuddly looking, if somewhat voracious, ocean mammals. But the call for an expanded seal hunt--previously limited to 250,000 a year--has strong support in towns such as Cannings Cove, where thousands of people such as Chatman, a former boat owner, and Penney, a former fish plant worker, have been unemployed since the Canadian government imposed a moratorium on cod fishing in 1992. Thousands of others have left the province altogether.

"We have culled out a couple of hundred fishing communities here in Newfoundland," said John Efford, the province's outspoken fisheries minister, whose family has been fishing the waters here since the 1700s. "Now it's time to cull out 50 percent of the seal herd. Those seals are eating 10 million pounds of codfish a month. Can you imagine how many people that would employ if it were humans who were harvesting those fish?"

Efford's campaign to reduce the seal population has won the qualified support of the Canadian government's fishery advisory committee, made up of industry and academic representatives, along with the fisheries committee of the House of Commons. But it has yet to gain the necessary approval from the government of Prime Minister Jean Chretien, which fears that a significant expansion of the seal hunt could bring a wave of bad publicity to Canada, perhaps even an international boycott of Canadian products.

A final decision on the size of next winter's seal hunt is expected this fall from Ottawa, which has been tangled up in cod politics since the 1992 moratorium. In the past seven years, the government has spent $2.5 billion on income assistance to fishermen and fish plant workers and on job retraining programs that have never materialized.

For many Newfoundlanders, the logic of a seal cull is exquisitely simple: Seals are the primary predator of adult cod. Thirty years ago, there were 2 million seals in the North Atlantic and a stock of cod estimated at 3 million tons. Today, there are 5 million seals and only 150,000 tons of cod. Therefore, they reason, only reducing the seal population will restore a healthy balance to the ocean ecosystem.

Like nearly everyone involved in this emotional debate, Efford acknowledges that overfishing by humans was the primary cause of the collapse of the cod fishery. But, he argues, it is the burgeoning number of seals that is preventing the fishery's revival.

Earlier this year, Efford determined to take a page from the playbook of animal rights groups that have raised millions of dollars with videos of harp seal pups being clubbed and butchered on the snowy ice. Efford's department produced its own video of marauding seals and dead cod lining the ocean bottom with their bellies eaten out.

But David Lavigne, a Canadian biologist who does research for the International Fund for Animal Welfare, says Efford's logic is not merely simple. "It's simpleminded," he said.

Lavigne said marine ecosystems are extremely complex, involving many more species than just seals and cod. Removing large number of seals is just as likely to hurt cod stocks as help them by increasing the number of other animals that eat cod or compete with cod for the same food, he said.

"There is no scientific data that would lead any dispassionate person to conclude that fewer seals would mean more fish for fishermen," said Lavigne, who added that cod make up only 3 percent of a seal's diet.

Caught in the middle of this scientific and political feud are the federal government's beleaguered marine biologists. These are many of the same scientists who were caught by surprise by the sudden collapse of the cod stock in the late 1980s. And their prediction that cod stocks would recover following a fishing moratorium has proved way off the mark, with offshore stocks lower today than when the moratorium began (inshore stocks have largely recovered).

Peter Shelton, the government's top cod expert, said there's not enough scientific evidence to either confirm or rule out the notion that an overabundance of seals is preventing recovery of the cod fishery.

An equally valid hypothesis, he said, could be that climate change has altered migration patterns of the seals and survival rates for baby cod. Gathering enough evidence to figure out which it is, Shelton said, will take more time and research.

But Fred Woodman, chairman of the government's Fisheries Resource Conservation Council, argues that policymakers can't afford to wait for scientists to reach a definitive conclusion. His group has recommended expanding the seal hunt to create seal exclusion zones in onshore areas known to be cod breeding grounds.

The council's proposal--calibrated to fall between the 2 million seal cull pushed by Efford and the current quota of 250,000 per year--was essentially endorsed in June by the House of Commons Committee on Fisheries and Oceans. To blunt international criticism, the committee also recommended increased public monitoring of the seal hunt to ensure that sealers were abiding by humane harvesting practices. These days, most seals are killed by high-powered rifles.

Ironically, even as the debate rages about seals and cod, the Newfoundland fishing industry is in the midst of a modest revival. Thanks largely to increased hauls of higher-priced shrimp and crab and the switch to underfished species such as turbot, the total value of last year's provincial catch--$530 million--was higher than even in the best years of the cod fishery. Farming of mussels and other seafood also is beginning to take hold.

While the value of Newfoundland's fishery has rebounded, however, its beneficiaries have changed. The bounty of the cod fishery was divided mostly among thousands of small-boat fishermen and workers at scores of little processing plants in remote fishing villages. The proceeds from the new fisheries, however, are concentrated in the hands of a limited number of large boat owners, and the processing business is concentrated in a few high-tech plants.

For these, the lucky and enterprising, the prospect of an international dispute over an expanded seal hunt would jeopardize the progress Newfoundland has made in the difficult transition to a more modern and efficient fishing industry.

Pros and Cons On Seals and Cod

Seals are the primary predator of adult cod. Thirty years ago, there were 2 million seals in the North Atlantic and a stock of cod estimated at 3 million tons. Today, there are 5 million seals and only 150,000 tons of cod.

Overfishing by humans is acknowledged as the primary cause of the collapse of the cod fishery. But John Efford, Newfoundland's fisheries minister, left, says it is the burgeoning seal population that is preventing the fishery's revival.

However, David Lavigne, a Canadian biologist, says removing large numbers of seals is just as likely to hurt cod stocks as help them by increasing the number of other animals that eat cod or compete with cod for the same food.

Cod make up only 3 percent of a seal's diet, Lavigne says.

Peter Shelton, the Canadian government's top cod expert, says the available scientific evidence does not support the notion that an overabundance of seals is preventing recovery of the cod fishery--but said it doesn't rule it out, either.

CAPTION: Wade Chatman, left, Baxter Penney blame seals for decline of cod fishery in Newfoundland.

CAPTION: A hunter clubs a harp pup earlier this year. Most seals are hunted with rifles.