An international panel in Washington is to hear arguments Monday on whether a new federal law banning the import of undersized lobsters violates the Free Trade Agreement between the United States and Canada.

Lobstermen, dealers and industry observers throughout New England and the Canadian Maritime Provinces say the panel’s decision could have a major impact on the industry.

“It could change the way lobsters are marketed,” and more significantly might change the way the government regulates lobster management, said University of Southern Maine Professor Charles Colgan, a former state economist.

At issue is a bill that President Bush signed into law in December, prohibiting the importation or interstate transportation of lobsters that do not meet federal minimum-size standards.

Lobsters that are shorter than 3 1/4 inches from the eye socket to where the tail begins are illegal under the new law. By 1992, the minimum legal size will be 3 5/16 inches.

But in Canada, lobstermen can catch lobsters one-sixteenth of an inch shorter than those allowed in the United States.

American lobstermen complained to Congress that they could not compete against the smaller, less expensive Canadian lobsters, which were being shipped to American markets. The new law barring the smaller lobsters could mean a potential loss to Canada of $20 million to $30 million in exports each year.

American officials maintain that the law will protect the lobster population by allowing more lobsters to live long enough to reproduce.

Canadian officials argue that the law is purely a trade barrier that violates the U.S.-Canada Free Trade Agreement. They say their country has plenty of conservation laws, and the United States has no right to tell them how to manage their resources.

The new law as written will help American dealers protect their domestic markets, but it also could lead to the loss of foreign markets, industry sources say.

Maine dealers previously could buy smaller lobsters from Canada and pack them for shipment to out-of-state markets. The new law prohibits that practice, and Maine and New England exporters are making changes to adapt to the law.