In 2009, an agreement between Israel and the EU liberalized trade in agricultural products and a range of services. EU imports from Israel soared to $16.7 billion last year.

The row over labeling comes days after the European Union voted to block EU grants and loans to Israeli entities if they are operating in the occupied territories.

But the moves could backfire, says Barak Seener, an associate fellow at the Royal United Services Institute.

“The EU has undermined its credibility, its relevance, as an effective or even an impartial interlocutor between Israel and the Palestinians because they’re taking a prejudiced reading of U.N. Resolution 242, which is purposely open-ended and ambiguous because the final status of the territories was meant to be the result of negotiations between Israel and the Palestinians," Seener said.

Already, Israel, retaliating for the European move, has blocked the EU from aiding tens of thousands of Palestinians in the West Bank.

But U.S. Secretary of State John Kerry’s success in bringing the Israelis and Palestinians to the table was coordinated with Europe, suggests Yossi Alpher, former director of the Jaffee Center for Strategic Studies who spoke to VOA on the phone from Israel.

“It’s difficult to avoid the impression that Kerry is working with the Europeans in order to apply at exactly the right time a certain degree of pressure to Israel with regard to the settlements and drive home the message that when it comes to issues relating to the West Bank and East Jerusalem, Israel is very much isolated,” Alpher said.