A worker carries boxes containing wine bottles for export at Shiloh Wineries, north of the West Bank city of Ramallah, on Nov. 8. (Baz Ratner/Reuters)

The European Union set new guidelines Wednesday requiring that Jewish settlements clearly label export products as coming from occupied territories. Israeli leaders condemned the move as discriminatory and warned that relations with their nation’s biggest trading partner could suffer.

The measures, issued by the European Commission, mean that farmers, vintners and manufacturers in East Jerusalem, the West Bank and the Golan Heights — even those employing Palestinian workers — may no longer boast a “Made in Israel” label for Europe-bound goods. Instead, they must tell consumers that the products come from a “settlement” in the territories, which were captured by Israel in the 1967 Arab-Israeli war.

Going forward, the poultry, dates, wine, olive oil, cosmetics and other consumer goods must display labels such as “product from the Golan Heights (Israeli settlement)” or “product from the West Bank (Israeli settlement).”

Products made by Palestinian-owned enterprises in the West Bank could be labeled “product from the West Bank (Palestinian product)” or “product from Palestine.”

Israeli Prime Minister Benjamin Netanyahu released a statement denouncing new E.U. labeling guidelines for Jewish settlements. (YouTube/IsraeliPM)

The decision represents a setback for the government of Prime Minister Benjamin Netanyahu, whose diplomats have alternately been cajoling and threatening the 28-nation European Union not to move ahead on the new guidelines, which have been under discussion since 2012.

Although the economic impact of the labels will likely be minimal — products from the Jewish settlements represent less than 2 percent of Israeli exports — the move is a potent symbol of Europe’s growing frustration with the collapse of peace talks with the Palestinians against the backdrop of Israel’s 48-year military occupation of the West Bank.

Ohad Cohen, head of the foreign trade administration in the Israeli Economy Ministry, said the rules would cover “maybe 100 companies” that account for about $50 million of the $13 billion in yearly exports to the European Union.

Hours before he was scheduled to meet with Secretary of State John F. Kerry in Washington, Netanyahu said European leaders “should be ashamed” and accused Europe of siding with Palestinian militants.

Israelis and Palestinians have been locked in a recent wave of violence, including deadly knife attacks by Arab assailants.

“The Israeli economy is strong and will withstand this. Those who will suffer will be the Palestinians who are employed in Israeli factories,” the prime minister said.

Few issues have caused more friction between Israel and the European Union than EU plans to impose labeling on goods produced in Jewish settlements on occupied land. (Baz Ratner/Reuters)

Israel’s Foreign Ministry called the labeling “a politically motivated and unusual and discriminatory step, that [the E.U.] learned from the world of boycotts.”

Palestinians, meanwhile, basked in a moment of international support. A senior Palestinian official, Saeb Erekat, applauded the European Union and called the labeling measure “a significant move toward a total boycott of Israeli settlements, which are built illegally on occupied Palestinian lands.”

In announcing the new policy, E.U. authorities said it was their duty to fully inform consumers about the geographic origin of products so that the buyers can make informed decisions.

The fallout of the new rules is unclear. Some consumers may choose to support Israel by buying settlement products; others may wish to send a message that they oppose Israel’s behavior.

The European Union does not recognize Israel’s sovereignty over territories occupied by Israel since June 1967, namely the Golan Heights and the West Bank, including East Jerusalem, and considers the Israeli settlements built on those lands to be illegal under international law.

More than 500,000 Jewish settlers live in the West Bank and East Jerusalem on land that the Palestinians want for a future state. There are 16 to 20 industrial parks as well as hundreds of farms, vineyards and date groves. Many employ Palestinian laborers.

The Gaza Strip, a territory ruled by the Islamist movement Hamas, also is included in the new E.U. rules despite the fact that Israel has no presence there.

Michael Oren, a former Israeli ambassador to the United States and now a member of parliament, said plainly that the E.U. decision “is anti-Semitic.”

“There are dozens of border disputes and ‘occupations’ in the world, but the E.U. decided to single out Israel,” Oren told the Jerusalem Post last week. “They are not labeling products from China, India or Turkey — only Israel.”

Science Minister Ofir Akunis called the initiative “a dark stain on the moral fabric of Europe, which bears witness to the fact that the lessons of history have not been learned.” He said the labels would “encourage terrorism.”

The Obama administration — and many members of Congress — oppose boycotts against Israel. But the White House position on the European label rules was less clear.

“We oppose efforts to isolate or delegitimize the state of Israel,” State Department deputy spokesman Mark Toner said Wednesday, declining to define the European move as a boycott.

Toner also repeated the long-standing U.S. position that “settlements are illegitimate, and they’re harmful to prospects for peace and to Israel’s long-term security.”

He added: “It shouldn’t be a surprise to Israel or to anyone that countries are looking at steps that could lead to boycotts or other efforts given their policy on settlements.”

A bipartisan letter signed by 36 U.S. senators, led by Ted Cruz (R-Tex.) and Kirsten Gillibrand (D-N.Y.), said the labeling “appears intended to discourage Europeans from purchasing these products” and “promote a de facto boycott of Israel, a key ally and the only true democracy in the Middle East.”

“We are also deeply concerned that enacting this policy would lead to the broader boycott of Israel,” the letter adds.

Ruth Eglash in Jerusalem and Carol Morello in Washington contributed to this report.