Genentic Engineering. Scientists are growing more adept at shifting genes from one plant or animal to another. As their skill sharpens, so will its effect on people's lives -- from having children to getting a job. This is raising some basic ethical, religious, and legal questions.

`THE residents of this community feel that they are being used as guinea pigs for the rest of the world,'' said Glenn Church of the Action League for Ecologically Responsible Technology. Mr. Church, of Tulelake, Calif., was among local citizens this summer who opposed a University of California-sponsored genetic experiment in a potato field about four miles south of the Oregon border.

Developed by scientists Steven Ludlow and Nickolas Panopoulos at the University of California at Berkeley, the test called for spraying a small outdoor patch of potato plants with a strain of bacteria to see whether it would inhibit frost formation, as hoped.

The test was not made. It may never be. Under pressure and threat of lawsuits from local environmentalists, state consumer groups, and a national anti-genetic engineering lobby, the Foundation on Economic Trends, the university backed off in late August.

University spokesman Ron Kolb said the experimenters will consider further studies on the potential environmental impact and other possible dangers posed by the bacteria and more thoroughly discuss the ramifications for the town of Tulelake and surrounding communities.

Did this genetic experiment pose any real dangers to this small California community?

Perhaps not. When it first granted a permit to proceed last spring, the United States Environmental Protection Agency said the test would ``pose minimal risk to public health or environment.'' But the locals were extremely skeptical.

Given the some of the history of genetics-related experiments, these qualms are understandable.

Take the case of the gypsy moth. Some of its eggs were brought to the United States by French entomologist Leopold Trouvelot. His long-range goal seemed worthy -- to crossbreed the insects with silkworm moths to produce a disease-resistant silkworm for his native France.

Unfortunately, several of the caterpillars escaped from his home in Medford, Mass. They reproduced in the wild, and their voracious descendants have now spread through New England and as far south as Virginia. Since its release in 1869, this pest has stripped the leaves off more than 5 million acres of trees. Public concern about mishaps

The gypsy-moth mishap didn't involve a genetically engineered organism. But it illustrates a major question that people are asking scientists who are tinkering with the fundamental building blocks of organic life: How do you know that a genetically altered organism you deem potentially beneficial to mankind won't have some unforeseen and disastrous consequence if let loose in the environment?

In Tulelake, Mr. Church had asked why, in the absence of more conclusive data, he and his fellow residents should take for someone else's benefit whatever risks might be involved in the Berkeley scientists' test.

``Many want to know who will be liable for [what] and how much if something goes wrong,'' he said. ``And who will guarantee the farmers [of the area] that the healthful image of their potatoes and other crops will not be tainted by the Ludlow experiment in the eyes of the consumer?''

This question is but one example of a growing list of ethical, moral, and religious issues swirling around the science of gene splicing.

Among them: What are the tradeoffs between ensuring public safety and assuring scientific progress? Should genetic-engineering development proceed at the risk of invading personal privacy and perhaps promoting social discrimination? How can individual or groups contribute meaningfully to a discussion on a subject they know little about and one that is perhaps too sophisticated for general understanding? What religious values are touched by gene-splicing techniques? Industry backs some regulations

Groups such as the Industrial Biotechnology Association and the Association of Biotechnology Companies -- which advocate full throttle for genetic experimentation -- support some restrictions on development to bolster public safety.

Robert A. Fildes, chief executive officer of the Cetus Corporation, a major independent biotechnology company, praised recently issued Reagan administration biotechnology guidelines, because they go ``one step further in defining what is the correct way and the right agency to go to for gaining regulatory approval of products.''

Gerry J. Elman, an industry lawyer who edits the bimonthly Biotechnology Law Review, also sees the need for caution in genetic development. But he stresses the long-range benefits of the new technology -- ``health, safety, convenience, comfort.''

He adds that this type of progress, which could potentially save millions of lives and feed the hungry around the world, should not be hampered by undue legislative and legal restrictions.

Some critics, however, insist that it is impossible to assess trade-offs, because no meaningful risk and liability assessments have been made for genetic experiments. Jeremy Rifkin of the Foundation on Economic Trends warns that a genetic accident could be far more disastrous than even a nuclear mishap. ``The future of civilization is at stake,'' he says.

David Baltimore, Nobel prize winner in physiology and medicine and director of the Massachusetts-based Whitehead Institute for Biomedical Research, has said that ``it's up to society to use science intelligently.''

``Scientists can play a major role in interpreting and explaining their results,'' Dr. Baltimore wrote in U.S. News & World Report, ``but in the end we have to live with the fact that we can create things that will have consequences that are very unpleasant to us. That's the chance we take.'' What are the social effects?

Those consequences aren't limited to physical changes in people or the environment. They also include consequences for society. For example, medical specialists' growing ability to predict a person's health and life expectancy through genetic analysis is raising serious questions as to how this information should be used.

Labor unions point out that pre-hiring biological tests of prospective employees could lead to job discrimination. For example, a person may be passed over for a position if his genes suggest the likelihood of a future illness which, although not job-related, might be deemed potentially expensive for the company in terms of health benefits and sick time.

Michael Baram of the Boston University School of Medicine, who has been studying the effects of biological testing in the workplace, says that company physicians in the US face an ethical dilemma: Are they advocates for the patient, for the company that employs them, or both? In Europe, occupational physicians have a clear, primary responsibility to the patient.

The American Bar Association's Human Rights Journal suggests that employee privacy might be assured by guaranteeing patients access to their own medical records and by adopting a doctor-patient role closer to the European model.

Such issues, says Sheldon Krimsky, professor of urban and enivornmental policy at Tufts University, in Medford, Mass., are worth a thorough public airing. A national conference is in the works for November that will focus on how genetic research can best be used to benefit the public.

Professor Krimsky, a member of a professorial watchdog Committee for Responsible Genetics, points out that too often business and professional scholars ``submerge values in technological jargon.''

He raises these ethical questions, among others: Should society be increasing its dependence on chemicals in agriculture? Such may be the case if crop strains can be genetically tailored to resist the effects of some pesticides and herbicides. And, he asks, what limits should be placed on human genetic engineering?

Another group increasingly interested in the issues surrounding genetic engineering is the ecumenical community. Some theologists point out that religious opinions range from ``preservationists'' to ``tranformationists.'' The former flatly reject genetic experimentation as tampering with biblical creation and natural order. The latter are cautiously open to gene research -- but usually only that which is intended to lead to better health and nutrition. Both groups tend to reject cross-species experiments.

Recently, the National Council of Churches -- an umbrella organization for Protestant groups across the United States -- adopted an official policy that embraced ``genetic science for human benefit'' -- such as improved food production and cure of blight and disease. But the council also urged caution on other experiments, especially those that affect family life and values, such as in vitro (or test-tube) fertilization, frozen embryos, and the use of surrogate mothers.

The Rev. J. Robert Nelson, a Methodist minister and director of the Institute of Religion at the Texas Medical Center, is the main author of a 22-page position paper that urges churches to ``undertake programs of research and education on the scientific, sociological, and political aspects'' of genetic engineering ``as well as on the theological, ethical, and moral ones.

Mr. Nelson urges theological seminaries to provide basic education in counseling families about the use of alternative reproductive technologies and the implications of genetic engineering. `Should we become parents?'

One potential issue: the use of genetic screening by prospective parents. The same tests that raise the possibility of job discrimination could also be used by physicians to see if would-be parents carry what are considered to be disease-related genes that might be passed on to their children. Depending on the result, such a test might discourage a couple from bearing children even though medical statistics show a small likelihood of any one child's contracting that disease.

Any notion of custom designing children -- while perhaps ultimately possible though genetic engineering -- is way over the horizon.

``The criteria for religion [in regard to genetic experiments],'' Mr. Nelson points out, include ``the sacred worth of human life,'' ``a commitment to fairness, justice, and love,'' and ``stewardship of creation.''

The Rev. Robert Barry, a Roman Catholic priest and an associate professor of religious studies at the University of Illinois, has done extensive research in this area. He says that his church ``generally encourages genetic engineering that is therapeutic in nature and doesn't alter the fundamental character of the human person.''

``It is the duty of churches to help establish clear guidelines and limitations [for genetic engineering],'' Fr. Barry holds.

Rabbi A. James Rudin, an official of the American Jewish Committee and a member of the New York State Task Force on Life and the Law, is extremely cautious about gene research. ``Genetic engineering is potentially very dangerous,'' he says. ``When you upset the balance of nature, you pay a price.''

Rabbi Rudin is particularly concerned about trying to alter the genetic qualities and sex of a child. He says that he is alarmed by the potential to ``breed'' (`a la Nazi Germany) ``racial superiority or inferiority.''

In proposing a national commission to monitor biotechnology developments that affect human genetic engineering, US Sen. Albert Gore Jr. (D) of Tennessee has said: ``We are at the present time woefully unprepared to grapple with the serious ethical choices with which the new technology will confront us. The very power to bring about so much good will also open the door to serious potential problems. If we are not careful, we may well cross the line separating the two.'' Tomorrow: How genes are altered.