Britain is pressing the European Union to be stricter about labeling imports produced in West Bank settlements, leading Jerusalem officials to fear a confrontation with London over the settlements issue. They say the latest moves are aimed at applying diplomatic pressure on Israel in a bid to stop construction in the settlements.

Quiet diplomacy is being employed to solve the dispute between London and Jerusalem, with low-level contacts as well as higher-level talks. Foreign Minister Tzipi Livni discussed the issue with her British counterpart, Foreign Secretary David Miliband, requesting clarifications. Miliband is scheduled to visit Israel later this month, and the topic is expected to be on the agenda.

The Independent reported on Monday that Britain circulated an internal note to the 27 EU members expressing concern that goods produced in the settlements may be entering Britain after being illegally exempted from tariffs in violation of an Israel-EU trade agreement. It urges the adoption of a more stringent labeling policy, clearly indicating the origin of goods. Currently the goods are designated as having been produced in the "West Bank," which according to the note issued by Britain could mislead consumers into thinking they were of Palestinian origin.

A senior Jerusalem official confirmed the existence of the note and said that Britain complained to EU members that they were not strictly enforcing the organization's agreement with Israel with regard to the settlements. The officials said that Britain had asked to consult with all EU member states on the issue but had not as yet received affirmative responses to the request.

Israeli officials believe that Britain is using a technicality in the free-trade agreement with the EU to put pressure on Jerusaelm vis-a-vis the settlements. Behind the British move is an EU resolution from the late 1990s providing tariff exemptions only to Israeli goods from within the Green Line, while goods produced in the settlements would be subject to the usual tariffs.

A few years ago Israel agreed to indicate on products exported to the EU the geographic location of goods. Britain charges that Israeli companies located in settlements try to get around the agreement by registering company offices within the Green Line.

According to the article in The Independent, British retailers, including Tesco, Sainsbury, Waitrose and Somerfield, acknowledge designating foods grown on settlements as coming from the West Bank and say this complies with the EU requirements. Marks & Spencer recently disclosed it had stopped stocking goods made in the West Bank.

"We are aware of [the note] and there is a dialogue between us and the British authorities," Foreign Ministry spokesman Yigal Palmor said Monday. "Our position in the past has been that labeling is out of the question, and that products could be identified according to the zip code."

In a statement to Haaretz on Monday the British Foreign Office said that Britain's position regarding the settlements - that they are illegal and constitute an obstacle to peace - is well-known. The statement said that Prime Minister Gordon Brown has asked all parties to cease all actions that could harm progress in realizing the road map, including the issue of labeling products from Israel or the settlements. It noted that concerns had been raised recently that various parties were exploiting Israel's trade agreement with the EU to bring goods from the settlements into Britain falsely labeled as coming from Israel.

Britain's embassy in Israel issued a statement saying it had no desire to comment on internal governmental agreements.

A British diplomatic source on Monday reiterated his government's position about the illegality of the settlements and said that all construction in these communities must cease immediately, including that labeled for "natural growth" only.

The source added that the British government has information concerning which goods from the settlements allegedly were exempted illegally from EU tariffs. He said that British Customs is investigating the issue and carrying out careful inspections of the goods. The source said his government will take special care to see to it that neither British nor EU policy aids in settlement construction.

Britain's move follows consumer protests in The Netherlands last year that resulted in promises from a major importer of organic produce, Udea, to refrain from dealing in settlement-produced items. Earlier this autumn the Dutch company Heineken, which has a partial ownership of Barkan Wineries, moved the last of the winery's operations out of a West Bank industrial zone, under pressure from consumer groups and the Dutch government.