The Israeli and British governments have clashed over imports from West Bank settlements, with Jerusalem concerned this may be the first salvo in a British-led international campaign.
The issue has been personally pursued by Prime Minister Gordon Brown, who, according to an internal document "has proposed a round-table involving UK government officials, NGOs, and retailers" to discuss it.
The dispute arises from complaints by the UK Revenues and Customs service that Israeli companies label products, especially fruit and vegetables grown on West Bank settlements, as originating within the Green Line.
In 2005, Ehud Olmert, then Israeli Finance Minister, and the then-European Trade Commissioner Peter Mandelson agreed that Israeli EU imports would be labelled with the postcodes of the area where they were produced, enabling governments and retailers to know if they originated on a settlement. The Israel-EU preferential trade agreement only covers products from within the Green Line. Now the Foreign Office is demanding that Israel identify settlement products more clearly.
In a circular distributed by the Foreign Office to all 27 EU members, Britain complains that "there has been an acceleration in settlement construction since Annapolis [the 2007 peace summit]" and adds that it is "keen to look at how UK and Community policies can avoid inadvertently supporting or encouraging settlement activity".
All retailers have now been sent information on inspecting goods from Israel to check their origin.
Israeli Foreign Minister Tzipi Livni has spoken to Foreign Secretary David Miliband but refused to change the labelling policy. It will be raised during his visit to Israel on November 16.
The Foreign Office initiative is a result both of pressure from consumer groups with a significant pro-Palestinian element, and also what would seem to be British ambitions to lead a campaign by the EU to force Israel to take action on the various settlement issues. The paper suggests the EU uses "political influence to encourage Israel to freeze settlement construction as per Israel's Roadmap commitments. This could include refreshing language on settlements and highlighting settlements as a particular issue."
"Britain wants to see some progress," said an Israeli diplomat. "And now that there has been a lull in terrorist activity, they are focusing on the settlements as the main obstacle."