The European Commission has announced plans to demand global manufacturers importing goods into the EU to apply a ‘made in’ label to all their products or risk sanctions. The World Trade Organisation is a staunch critic of such labels which it describes as making little sense in a world of globalised supply chains. Similar regulations have been in place in the US since the 1930s and countries like China and Japan also require clear labelling of imports. Past attempts by the EU to introduce mandatory labelling of imports were largely supported by southern member states but have been vetoed by free-trade proponents like Germany and the UK.

The regulations, if approved, will force European companies who manufacture goods abroad to divulge if their products are produced in countries with lower wages or less stringent labour legislation. High-end fashion and luxury goods manufacturers are likely to approve of the new labels, though other industries might not be as enthusiastic.

“It’s a ground breaking decision,” says Paloma Casto, global director of corporate affairs at LVMH, the luxury goods conglomerate. “Imposing a concept of reciprocity on labelling between Europe and the rest of the world is a very good move for the higher end industry.”

The director of an unnamed German sportswear group who asked to remain unnamed is less enthusiastic, “Our products are of very high quality, but if we put the China label then a lot of our potential customers might think that the good is of lower quality because of the bad and unfair reputation Chinese goods have in Europe,” he told reporters.

EU trade commissioner Karel De Guchtm who has already been forced to drop previous proposals for labelling rules, says the decision to introduce the new rules are a “consumer protection measure is a clear sign from Brussels that we are not erecting trade barriers, we are simply making sure consumers know the origin of the product they buy.”

But the WTO remains opposed to the legislation, arguing that the labels are misleading. “Gross statistics can be misleading and give the impression that a Nokia smartphone imported from China is made in China, suggesting that all the jobs necessary to produce this good are Chinese jobs, “ says Alejandro Jara, the WTO director-general. “But this is hugely misleading, if we look at research carried out in Finland.

Critics have also argued that simplistic labels might give countries like China and India more credit than they have earned for their exports, which are often assembled from parts manufactured in a number of different countries.