The entrance to Craters restaurant is guarded by a phalanx of bombshells, each as big as a man. Opposite, the Dokkhoune hotel boasts an even finer warhead collection. For tourists who have not cottoned on, the Lao town of Phonsavanh lies at the heart of the most cluster-bombed province of the most bombed country on earth.

The haul of unexploded ordnance (UXO) is just a taster of that littering the countryside, or sitting in vast piles around homes and scrapyards. The deadly harvest from the US bombing of this landlocked country 30 years ago in the so-called "secret war" as the real battle raged in next-door Vietnam has become big business. Steel prices that surged on the back of soaring demand from China's go-go economy drove up scrap prices five-fold in eight years in impoverished Laos. It sent subsistence rice farmers, struggling make to ends meet amid spiralling food and fuel prices, scurrying into their fields in search of the new "cash crop".

But it comes at a high price. At least 13,000 people have been killed or maimed, either digging in fields contaminated with live bombs or, increasingly, in their quest for lucrative scrap metal. Half the casualties are young boys, most killed by exploding tennis-ball-sized cluster bomblets - christened "bombies" locally - that are everywhere.

The scale of the contamination is mind-boggling. Laos was hit by an average of one B-52 bomb-load every eight minutes, 24 hours a day, between 1964 and 1973. US bombers dropped more ordnance on Laos in this period than was dropped during the whole of the second world war. Of the 260m "bombies" that rained down, particularly on Xieng Khouang province, 80m failed to explode, leaving a deadly legacy.

Overwhelmed by the immensity of the clear-up, Laos - which has dealt with just 400,000 unexploded munitions - had resisted the signing today in Oslo of a treaty banning cluster bombs and demanding that remnants be cleared within 10 years. But the country has had a rethink and will now be a key player in the ceremony.

For Laos it could be a godsend, focusing world attention on its plight and bringing international resources to tackle the problem. With 37% of agricultural ground made unsafe by unexploded munitions in a nation where four-fifths of people farm the land, the scourge has stifled development.

Yet farmers eking out a living below the dollar-a-day poverty line have no choice. Bombs unearthed as they gingerly peck at the soil are planted around, or moved to the side of the field.

"In the end the Lao people regard lack of food as much greater threat than unexploded bombs," said David Hayter, the Lao country director of British-based Mines Advisory Group (MAG). "It's just that each UXO death is marked by a big bang, but deaths from lack of food or poor water are less noticeable."

Fatalistic acceptance of the danger is fostered by familiarity. Bomb remains are fashioned into everyday items: cluster-bomb casings become fencing; houses perch on stilts crafted from 500lb bombs; mortars with fins are used as table lamps. "People's familiarity is the most striking thing for me," said Jo Pereira, an occupational therapist with the Lao charity Cope, which fits UXO victims with prosthetic limbs. "They've lived with it for so long. Much of it is in their houses. Children think 'we've got those at home' and don't see the risks."

So when scrap metal prices rocketed many saw it as a heaven-sent opportunity to boost meagre incomes. For those unable to grow enough rice to feed their families throughout the year, there is little choice but to collect UXO scrap despite the dangers.

"People have lived with this for two generations," said Gregory Cathcart, an MAG programme officer. "They don't view it as risky. It's simply a cash crop. The problem is the main scrap on the surface is gone, so they've to dig it up which is extremely dangerous."

Cheap Vietnamese metal detectors costing as little as £7.36 boost the business. Landless families have turned full-time scrap collectors, earning up to £2.70 a day if they unearth six or seven kilos. Stumble on half a cluster bomb casing of "best Detroit steel" and they hit pay-dirt, worth £20 to £27.

No such luck for Sher Ya, 25. He plonks a plastic bag of bullet casings on the scrap dealer's scales and anxiously eyes the needle. His teenage brother dredged the shells from their village rice field. It earns a welcome 40p. "My family grows only enough rice for six months," he said. "So when we're not planting or harvesting we collect bomb scraps. It's scary, but we've no choice."

The trade is so lucrative that scrap dealers ferry collectors by truck to virgin forests every day. Sypha Phommachan, 45, need not to go to such lengths. Farmers around Thajok village beat a path to the scrap dealer's door. A pile of fragments, casings, and mortars is all she had left after the foundry took away nearly eight tonnes a few days before.

"That took me about three weeks to collect," she said. "That's quite slow because it's the rice harvest season and people are busy farming. In a couple of months they'll be out furiously collecting to raise cash for the Hmong festival." Yet she carefully inspects the bomb harvest, rejecting live munitions. She knows the risks. In the six years she has lived in the village, 10 people have been killed collecting scrap. One 50-year-old man died three months ago when he tossed half a "bombie" he believed safe into the wicker basket on his back. It exploded and the ball-bearings it threw out went clean through his chest, killing him instantly.

Today's treaty banning the stockpile and use of cluster munitions is due to be signed by 107 countries - including the UK, which has been the third biggest user. Those holding out include the US, China, Russia and Israel.

But Richard Moyes, co-chair of the Cluster Munition Coalition, is confident that the convention will change the climate. "We sense we'll see a dramatic decline in cluster munitions use even among states that don't sign."