Britain has struck a secret deal worth £1 billion to sell arms to Thailand in return for promoting food that has been linked to cancer-causing chemicals.
The deal, which was last night condemned as 'disgraceful' by opposition MPs and farmers, involves Britain selling guns, Hawk jets, riot control equipment and secondhand frigates from the Royal Navy to Thailand.
In return, Britain has agreed to provide financial help to Thailand to develop its farming industry and promote Thai food products in this country and abroad.
The deal was conceived in May, when the Thai prime minister, Thaksin Shinawatra, visited the UK and met Defence Minister Geoff Hoon and Trade Minister Patricia Hewitt. Hewitt also agreed to help Thailand overturn the European Union ban on the import of Thai chickens.
The ban was introduced after it was discovered that the poultry contained cancer-causing chemicals after farmers had been using illegal veterinary drugs.
The agreement on the highly controversial arms deal was formally signed last month by the British ambassador in Bangkok.
Opposition MPs last night claimed the deal has strong echoes of the arms-for-aid scandals that plagued the Tories and were supposedly outlawed by the Labour government.
The Liberal Democrats have demanded full details of the agreement, questioning what taxpayers' money is being used to support the deal and whether it is compatible with EU free trade policy.
Vince Cable, Lib Dem trade and industry spokesman, who last night wrote to Hewitt, said: 'This is a deeply depressing and disgraceful deal. Linking arms sales with food production gives a whole new meaning to the phrase "swords to ploughshares".
'If the DTI is to promote actively the import of Thai food goods for the sole benefit of BAe Systems, then the Labour government has sunk to a new low in its arms trade policies.'
A spokesman for the Campaign Against the Arms Trade said: 'Not only is this another example of pushing weapons sales on the developing world but to tie it with food production is outrageous and morally unacceptable. It's simply an arms-for-aid scandal in another guise.'
The farming community has also reacted with anger at the deal which it claims threatens jobs.
Ian Johnson, for the National Farmers Union in the South West, said: 'Aside from the moral question, it's extraordinary that the Government which appears to have abandoned British farmers seems to be doing all it can to help farmers in the Third World who will end up exporting cheaper - and some would argue - inferior products into our markets.'
According to reports in the Thai press, under the pact the British government would seek to increase imports of Thai farm produce and help find new markets for Thai goods. In return the Thai government will buy arms from British Aerospace, now known as BAe Systems.
The Department of Trade and Industry last night refused to comment on the deal, but the Foreign Office defended it, saying it will modernise Thai armed forces and help it combat terrorism, at the same time alleviating poverty and improving its food production.
A Foreign Office spokesman denied it was an 'arms-for-aid' deal because it would be BAe Systems investing in Thailand's agriculture sector and not the British state. He said Britain would promote Thai food exports to other parts of the world and not the UK.
A spokesman for BAe said the deal was in an 'embryonic stage' and was a little 'unusual'. But he said it was similar to most major defence deals in which the company agrees to invest in local industry, known as 'offsets'.
In 1997, International Development Secretary Clare Short announced she was banning deals linking arms sales to aid, following the Pergau Dam scandal in which the Conservative government gave Malaysia £300m to help build a controversial dam in exchange for buying British arms. The High Court ruled that former Foreign Secretary Douglas Hurd acted unlawfully in allowing such a deal.