South Africa last week decided to label goods produced in the West Bank as originating in " Occupied Palestinian Territory" instead of "Made in Israel."

The decision was well received among the Palestinians, however, Israeli Deputy Foreign Minister Danny Ayalon said that South Africa remains "an Apartheid state" and that labeling was done to deflect attentions from recent mining riots in northern South Africa.

Both sides are now closely watching the moves of the European Union (EU), which is a major export market for Israel, to see if it will follow the South African initiative.

Dr. Eran Oded, of Tel Aviv University and a former Israeli ambassador to the EU, told Xinhua Monday that he very much doubted that the EU would heed the calls to follow the South African initiative.

"Israel has an arrangement with the EU concerning the products coming from the settlements and the arrangement is that Israel issues certificates of origin stating the place from all over the country stating that it is Israel and the EU makes its own distinctions, so they will probable stick to this arrangement," Oded said.

In accordance with the 1995 EU-Israel Free Trade Agreement, products made in Israel can be exported to the EU duty-free. It applies to products that are manufactured in Israel proper and does not include the West Bank, but the EU had not issued a list of which locations it considered to be in the West Bank.

Previously, there has not been a way for importers in Europe to tell whether the label "Made in Israel" meant that the goods were made in Israel and therefore eligible for the tax discount or not.

However, on Aug. 15, the EU published a list of locations that it considers to be beyond the Green Line, meaning areas which Israel has controlled since the 1967 war, and are therefore need to pay the full taxes.

The list includes communities both on the West Bank and on the Golan Heights, but to Israel's ire, it also includes Modiin, Israel's fifth largest city which is built on what was no-man's land between Tel Aviv and Jerusalem between the 1949 and 1967 wars.

In response to the inclusion of Modiin and the publication of the list, the Israeli Foreign Ministry released a statement saying that "the EU ignores reality when it extends the domain of conflict to places and issues that do not belong there."

"As for the other locations mentioned in the EU list, the European approach, though not new, is not acceptable in Israel's view, and it is being addressed through ongoing diplomatic engagement," it continued.

POLITICAL CONSIDERATION

Prof. Gerald Steinberg of Bar-Ilan University described the South African decision as "a form of political warfare" and he too said that it was highly unlikely that the EU would make the same decision as the South Africans.

"EU officials recognize that this is a form of political warfare and I also think that the South African government will eventually realize that they have made a mistake and that this is counterproductive," Steinberg said.

"If the EU moves in this direction it will completely destroy Israel's relations with the EU; the EU will be shut out of any peace process role," he added.

The EU has been heavily involved in the Israeli-Palestinians peaces talks from the start in 1993 and in later years as part of the Middle East Quartet, together with the United Nations, the United States and Russia.

However, at times the Europeans have found it hard to translate their economic ties with Israel into political influence, where the United States still dominates despite being close to on par with the EU when it comes to value of Israeli goods exported to it.

ISRAEL-EU RELATIONS

While Steinberg and Oded agreed that the EU would not follow South Africa, they differed on the state of Israeli-EU relations.

Steinberg argued that "there are far too many EU officials that deal with Israel through the prism of a Palestinian-Israeli conflict," and that this has created a great deal of friction between the two as Israel would like to deal with the EU on bilateral terms.

He added that this standpoint was part of the political culture in Europe and that it needs to change.

Oded, on the other hand, described this view as "an exaggeration," and said that relations are very solid, although there are a number of issues where the parties disagree, but overall the relations are very stable.

"Israel and EU maintains a wide range of initiatives," Oded said, adding that Israel is a full member of the EU research and development program which Israeli scientists take part in in over 800 research projects with European scientists.