The European Council is to discuss the proposal by the European Commission on 8 June and EU officials say that the situation is unlikely to be altered.
The dispute escalated this week when Benjamin Netanyahu, the Israeli Prime Minister, said that a refusal to treat goods from the occupied territories as Israeli would make it impossible for the EU to play a part in the Middle East peace process.
The European Commission insists the move is not political, but is simply the application of existing laws under which only goods which are really made in Israel benefit from customs reductions. Nevertheless, Zalman Shoval, the Israeli ambassador-designate to the United States, compared the action to what happened in Germany in the Thirties. "We saw a similar boycott of Jewish goods 50 years ago," he said.
This verbal escalation by Mr Netanyahu and Mr Shoval is a familiar tactic, designed to put their opponent on the defensive. It is not clear how far it has worked in this case. After Yaakov Neeman, the Israeli finance minister, saw the 15 EU ambassadors yesterday, he said the meeting was "very constructive".
Earlier, the EU Commission had responded brusquely to Mr Netanyahu's remarks by saying: "The EU is not willing to listen to a political lecture from Tel Aviv."
Europe is Israel's third biggest trading partner and the withdrawal of privileges would seriously hit the country's agriculture. The EU also has a trade agreement with the Palestinian Authority. The enforcement of trade regulations to the letter is the EU's only effective means of putting pressure on Israel.Reuse content