Premier Danny Williams said Wednesday that fears of NAFTA countervailing measures prevent the government from using cash to resolve an impasse over crab prices. (CBC)

The spectre of a NAFTA challenge is preventing Newfoundland and Labrador from using its chequebook to resolve a fisheries crisis, Premier Danny Williams said Wednesday.

Most of the province's crab industry has been idled amid a long-running price dispute between fishermen and processing companies.

At the legislature, Williams said the government is doing "everything we can" to resolve the dispute in the time-sensitive crab season, but spending its way out of the problem is not in the cards.

"We're restricted by countervail issues, we're restricted by issues with NAFTA. We have to be very careful what our involvement is in resolving this process," Williams told the house of assembly.

"An interjection of money in some areas is fine … but if we go too far as a government and we inject a significant amount of money, that's deemed to be in violation of free trade … and we create huge problems in an area we don't want to."

Thousands of people in many coastal communities rely on the crab fishery, which has been the most lucrative part of Newfoundland and Labrador's seafood industry since the cod collapse of the early 1990s.

But a price of $1.35 per pound, set by a government-appointed panel, has pleased neither harvesters nor processors. Skippers say the price barely covers their fuel and labour costs, while fish plant owners say the soaring Canadian dollar and a continued slump in demand in the key U.S. marketplace have pushed prices well beyond what they can afford.

On Wednesday, union and company officials continued meetings aimed at hammering out a deal.

Williams said the government has been involved in trying to broker a deal, but has limits on what it can do.

"It's up to the parties to try and bring this together. Government has a role here, but it's a limited role," Williams said.

Liberal Leader Yvonne Jones pressed the government at the legislature to step in with a solution that will help the crab industry salvage a season that is already underway.

"We know what all that means — no money, no action for the 20,000 people that are affected," Jones said.