LONDON: This much we knew already: Tony Blair's administration is riddled with double standards and hypocrisy in its international dealings. But Lord Goldsmith's announcement that the Serious Fraud Office was calling off its investigation into alleged corruption involving BAE Systems and Saudi Arabia dragged matters to an all-time low.

The explanations given are startling. Goldsmith has form in being flexible with the law and the truth -- as with his legal advice in advance of Iraq. He said the following, to a near-empty House of Lords on Thursday evening as the media's attention was on the police questioning of the prime minister and the report on Diana's death: "It has been necessary to balance the need to maintain the rule of law against the wider public interest." In this respect, he was nothing if not candid: the law is not sacrosanct. He and others went on to say that this interest was not commercial, but based in diplomacy and security. As not a shred of evidence has been provided, one can be fairly safe in dismissing this as disingenuous.

The economic concerns are understandable. BAE is one of the UK's largest corporations and the world's fourth largest arms company. The Al-Yamamah deal, signed in 1988, has been worth £43bn. These and other justifications were eloquently set out on the radio yesterday by the former Conservative convict, Jonathan Aitken.

The problem here is not really BAE. Companies flog arms around the world, if they are allowed or encouraged to. The job of politicians is to ensure that economic activity is consistent with the law and other standards. The response of Labour MPs and trade unions has been shoddy. Jobs are important, but the need to preserve them should not supersede the law. There is, indeed, no evidence that the arms industry is the best way of creating and sustaining employment.

It is the one sector that has been allowed to buck the rigours of the market, where cartels are rampant and state subsidies in the UK alone are estimated at close to £1bn a year.

The arms industry has long enjoyed special treatment from government. Documents obtained by this newspaper three years ago showed how the Defence Export Services Organisation, an arm of the Ministry of Defence, has been officially authorising what it calls "special commissions" -- in other words, bungs. In so doing it was conspiring to break Britain's own laws. None of this is new. According to those same documents, the head of DESO acknowledged back in 1977 bribes paid to the Shah of Iran. Just as then, just as now, we seek to ingratiate ourselves with odious regimes. Irrespective of the morality of this approach, it rarely pays dividends in terms of security and intelligence.

What is most disconcerting is that this government, briefly, pledged to be different. Robin Cook's mission statement of May 12 1997, quietly disparaged by Downing Street, still bears remembering. "Our foreign policy must have an ethical dimension and must support the demands of other peoples for the democratic rights on which we insist for ourselves," he said. This code of conduct has since been unpicked to such a degree that it is now meaningless.

Now, thanks to Blair, Britain can be blackmailed at will by dictatorships, and will do whatever it takes to stay on good economic terms with them. When in future a foreign government cocks a snook at us over civil liberties, when children are killed by oppressive governments using weapons made in the UK, greet the howls of outrage from our ministers with derision. When Blair or Gordon Brown or any future prime minister cite morality in waging war in a foreign land, treat their words with scorn.

* John Kampfner is editor of the New Statesman.—Dawn/The Guardian News Service