The European Union's executive approved on Wednesday new guidelines for labeling products from Jewish settlements in the West Bank, East Jerusalem, Gaza and the Golan Heights, a move that has already been criticized by Israel as "discriminatory" and damaging to peace efforts with the Palestinians.
The European Commission "adopted this morning the Interpretative Notice on indication of origin of goods from the territories occupied by Israel since June 1967," said an EU official.
Israel responded with a declaration that the government will suspend a series of ongoing meetings with the European Union.
Drawn up over three years by the European Commission, the guidelines mean Israeli producers must explicitly label farm goods and cosmetics that come from settlements when they are sold in the European Union. The EU guidelines aren't expected to necessarily apply to Israeli industrial or electronic products, or to non-fresh foods.
Israeli officials were briefed ahead of the decision and some suggested it was anti-Semitic.
Prime Minister Benjamin Netanyahu called it "hypocritical" and indicative of a double standard. "The EU has decided to label only Israel, and we are not prepared to accept the fact that Europe is labeling the side that is being attacked by terrorism," said Netanyahu. "The Israeli economy is strong and will withstand this; those who will be hurt will be those Palestinians who work in Israeli factories. The EU should be ashamed."
Deputy foreign minister Tzipi Hotovely said Wednesday that Israel was sending a "very strong message" of displeasure. "We say you can't be involved in what is going on in the Middle East while you are taking such an extreme step of labeling products... boycotting us," she told Channel 2 TV.
Ministry spokesman Emmanuel Nachshon said Israel would suspend a series of regular dialogues on political issues in the Middle East, human rights and international organizations.
The EU does not recognize the legitimacy of Israel's presence in the West Bank, Gaza, East Jerusalem and the Golan Heights, territories captured by Israel in the 1967 Six-Day War. As such, goods from there cannot be labelled "Made in Israel" and should be labelled as coming from settlements, which the EU considers illegal under international law.
The EU says the labeling policy aims to distinguish between goods made inside the internationally accepted borders of Israel and those outside.
Gaza seems to be included despite the fact that Israel has no presence in the Strip anymore. Officials in Israel point to the inclusion of Gaza as an indication the decision is in fact political in nature, and meant to show that in the eyes of the EU, Israel's occupation of the Gaza Strip has not ended because of the blockade imposed over the Palestinian enclave.
EU Vice-President Valdis Dombrovskis insisted the measure was "a technical issue, not a political stance."
He said the guidelines had to be taken after three member states - Britain, Belgium and Denmark - already had imposed special labeling on their own, forcing the EU to streamline measures throughout the 28 nations.
"The EU does not support in any form a boycott or sanctions against Israel," he said, insisting that Israeli products from within the internationally recognized borders still benefit from EU preferential tariff treatment.
EU officials have said that in Britain, where the labelling is already in place, it has had no negative economic effect. Also, for over a decade now, the EU has excluded products from settlements from trade preferences.
The guidelines determine that merely labeling products as "Product from the Golan Heights" or "Product from the West Bank" would not suffice, and the label must also include the words "Israeli settlement" in brackets. If an Israeli farmer refuses, a retail outlet can do so, as the European Commission has sufficient information about where goods come from.
"It's an indication of origin, not a warning label," the EU ambassador to Israel, Lars Faaborg-Andersen, told Reuters.
'Product labeling doesn't advance peace'
Two elements of the EU decision have particularly enraged Israeli officials. They see the measures as an effective boycott of Israel and say other cases of long-standing occupation, such as Morocco's seizure of Western Sahara, are not treated in the same way.
The EU dismisses the suggestion of a boycott, pointing out that it is not telling consumers what not to buy. Those who do not want to buy Israeli settlement goods probably already avoid them, and those that support the settlements may now more actively seek out settlement produce.
The question of a double-standard is harder for the EU, which has struggled with the question of Western Sahara in the past. When it comes to goods from northern Cyprus, seized by Turkey in 1974, the EU calls it "an internal issue."
Israel's ambassador to the European Union, David Walzer, warned it could make difficult peace talks between Israel and the Palestinians harder and the EU might no longer be a welcome broker.
"We made it very clear that we welcome EU contributions to the peace process," Walzer said before the decision was formalized. "This might force us to reconsider that."
Israel's Foreign Ministry summoned the EU ambassador to Israel, Lars Faaborg-Andersen, for an official rebuke.
"Israel condemns the decision of the European Union to label Israeli products originating from areas that are under Israeli control since 1967. We regret that the EU has chosen, for political reasons, to take such an exceptional and discriminatory step, inspired by the boycott movement, particularly at this time, when Israel is confronting a wave of terrorism targeting any and all of its citizens," the Foreign Ministry said in a statement.
"It is puzzling and even irritating that the EU chooses to apply a double standard concerning Israel, while ignoring that there are over 200 other territorial disputes worldwide, including those occurring within the EU or on its doorstep. The claim that this is a technical matter is cynical and baseless," the ministry went on to say.
"Product labeling does not advance any political process between Israel and the Palestinians. The opposite is the case - it is bound to reinforce the PA’s refusal to conduct direct negotiations with Israel, negotiations that the EU claims to support. Product labeling will strengthen the radical elements advocating a boycott against Israel and denying Israel’s right to exist, contradicting positions that the EU publicly opposes. This recent step raises questions regarding the role that the EU aspires to play. It may also have implications for Israel-EU relations."
Defense Minister Moshe Ya'alon added to the condemnation by calling the move a "shameful step that grants terror a prize."
Israel worked hard to delay the publication of the guidelines, both by lobbying EU states directly, and by lobbying the US government so that it might put pressure on the EU. Prime Minister Benjamin Netanyahu has even contacted a number of European leaders in the past few days, claiming that the labeling of products would be immoral.
The sources said it is a measure that informs European consumers about the origin of these products. "Those who say such a step is only taken against Israel forget that there are areas of the world that are under occupation, from which you can't export products to Europe at all, like Crimea for instance," they added.
The details of the guidelines, set out in a five-page document of some 12 paragraphs, are expected to be published formally later on Thursday. A Commission source said they did not constitute new legislation.
Since 2004, Israeli settlement products have not benefited from trade preferences to the European Union, while for all countries the EU has agricultural legislation that requires labeling of the origin of fruit, vegetables and honey.
Industrial goods, including processed food, are not subject to mandatory labelling under EU law, but can be voluntary.
The measure will primarily cover fruit and vegetables from the area. The labeling should affect less than 1 percent of all trade between the EU and Israel, which stands at some 30 billion euro ($32 billion), including 13 billion euro ($14 billion) Israeli exports into the bloc.
Israel's Economy Ministry estimates the impact will be about $50 million a year, affecting fresh produce such as grapes and dates, wine, poultry, honey, olive oil and cosmetics.
That is around a fifth of the $200-$300 million worth of goods produced in settlements each year, but a drop in the ocean next to the $32 billion of goods and services Israel exports to the EU annually, a third of all its exports.
Elisha Ben Kimon and the Associated Press contributed to this report.