Benjamin Netanyahu
Israeli Prime Minister Benjamin Netanyahu has ordered suspension of diplomatic contacts with EU bodiesReuters

Israel has suspended talks over Palestine with EU bodies after the trade bloc issued new guidelines that require Israeli producers to explicitly label farm goods and other products for export that come from Israeli settlements in the West Bank. The EU contends that goods coming from the West Bank into the EU cannot be labelled "Made in Israel" as it considers the occupation illegal under international law.

Prime Minister Benjamin Netanyahu on 29 November "ordered suspension of diplomatic contacts with the institutions of the European Union on this issue", a foreign ministry statement said. He asked the foreign ministry, which is headed by him, to carry out a review of the involvement of EU bodies in everything connected to the diplomatic process with the Palestinians. However, this move will not affect Israel's relations with individual countries in the European Union, the statement clarified.

Israeli farmers and wine growers in the West Bank have expressed worry about the impact of the EU move on their business. A Reuters estimate puts an expected yearly loss of £33.2m ($50m) by the move across products ranging from grapes and dates, wine, poultry, honey, olive oil, cosmetics and more. For the Israeli government, it's a relatively small amount given that it trades close to £20bn of goods and services with the EU annually.

Since the new guidelines were published on 11 November, the EU has downplayed the move as a technical matter. It explained that it is not a boycott of Israel but rather a measure to inform consumers that the products were not made in Israel.

The EU holds that all territory over the pre-1967 lines — including east Jerusalem, the Golan Heights and the West Bank — are not part of Israel. Hence, products from these areas are excluded from the Israel Free Trade agreement with the EU. Israel has called the move "discriminatory" and warned of damage to peace efforts with the Palestinians.