The European Union (EU) today approved new guidelines for labeling products from Israeli settlements on occupied land, a move Brussels says is technical but Israel branded "discriminatory" and damaging to peace efforts with the Palestinians.

Drawn up over three years by the EU executive, 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 EU.

Israeli officials were briefed ahead of the decision and some suggested it was anti-Semitic.

"This is a technical measure, not a political one," one commission source who declined to be named said on Tuesday. "The occupied territory is not part of the sovereign state of Israel, so goods cannot be sold as 'Made in Israel.'"

The EU does not recognize Israel's occupation of the West Bank, Gaza, East Jerusalem, and the Golan Heights, lands it captured in the 1967 Middle East war. It says the labeling policy aims to distinguish between goods made inside the internationally accepted borders of Israel and those outside.

Britain, Belgium, and Denmark already affix labels to Israeli goods, differentiating between those from Israel and those, particularly fruits and vegetables, that come from the Jordan Valley in the occupied West Bank. Now all 28 EU member states would have to apply labels.

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 $30 billion of goods and services Israel exports to the EU annually, a third of all its exports.

While there is no EU official wording, goods must carry the word "settlement" on the label when sold in European shops.

Israel's ambassador to the EU, 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."

A second commission source said the guidelines were requested by EU governments who sought clarity on existing EU labeling rules and that the five-page document of some 12 paragraphs did not constitute new legislation.

Since 2004, Israeli settlement products have not benefited from trade preferences to the EU, while for all countries the EU has agricultural legislation that requires labeling of the origin of fruit, vegetables and honey.