He told the Scott inquiry into the sale of arms to Iraq that he agreed and signed a witness statement for the prosecution of three executives from the Matrix Churchill company which had been drawn up by Customs officials who came to interview him.
He claimed he did not realise he was being interviewed for a witness statement and did not recall being asked any questions about his knowledge of the case. Mr Clark denied that an important sentence in his statement, which was a cornerstone of the Customs case against the businessmen, was misleading. He said it contained an 'element of sleight of hand'.
After the collapse of the Matrix Churchill trial last year at the Old Bailey, Mr Clark was questioned by police about apparent discrepancies between his witness statement and court evidence, although he was never charged. Mr Clark said he considered the statement to be 'almost a formality' and thought the prosecution 'so ridiculous nothing would happen'.
He later signed a second statement for the prosecution of another UK company director, without realising the charges concerned exports Mr Clark had approved as a trade minister in order to protect an intelligence source. Mr Clark said he could not have signed the statement if he had known this. Charges against the director were later dropped.
Mr Clark said he never objected to appearing as a witness but was 'sceptical' about the prosecution.
He told the inquiry someone in Whitehall should have 'gulped' when Lord Trefgarne, a former trade minister, wrote to William Waldegrave, then a Foreign Office minister, in March 1990 stating there was no evidence of UK machine tool exports to Iraq 'for anything other than civil engineering' and rejected links with ballistic missiles launched in Iraq and the discovery of triggers later found to be parts for the Iraqi supergun.
But a 'failure of liaison between several desks' meant that those aware of successive intelligence warnings that the machines were destined for Saddam Hussein's weapons plants may never have seen the letter.
He agreed with Presiley Baxendale QC, inquiry counsel, that it amounted to a 'chain of ignorance' within and between the Whitehall departments involved. Mr Clark said John Major spoke to him after a newspaper article had claimed Mr Clark encouraged machine tool manufacturers to emphasise 'civilian aspects' of exports which they knew would be used to make munitions.
'There had been calls for my resignation on the basis of what had been written. The Prime Minister assumed it would be raised under Prime Minister's Questions, and wanted to be briefed by me,' he said. A record of the two men's conversation kept by the Cabinet Secretary, Sir Robin Butler, was altered by Mr Clark because it was 'wrong', the inquiry was told.
The minute originally suggested Mr Clark had in effect told manufacturers: 'Call it something peaceful and we won't make difficulties.'
It was claimed he had given this advice when he met machine tool companies to discuss problems caused for them by government guidelines restricting exports to Iraq.
Mr Clark told the inquiry he had not spoken to Sir Robin or anyone on his behalf and did not recognise the version of what he had told companies.