The city used to be part of a buffer 'no-man's land' between Israel and the West Bank that was dissolved after the 1967 Six-Day War. The change in recognition is expected to only affect three rather upscale zip codes, according to the Times of Israel, but it will also affect the price of exporting goods from that area.
The area now falls outside the1995 EU-Israel Association Agreement, which was designed to provide Israel with free trade with the EU, similar to what EU member states currently enjoy. This could raise the prices on goods imported from Israel, thus making European states less likely to purchase Israeli goods in the first place.
Ynet News also reported that this may mean the EU has "capitulated to pro-Palestinian elements seeking to derail Israel's economy," even though the effected zip codes are not industrial areas.
Member of Knesset Danny Danon blasted the EU's declaration in a statement to Israel National News, saying "It appears that anti-Israel sentiment is blowing through the European Union. The status of the city of Modi'in is the same status of Tel Aviv. Conflicting definitions of reality as presented by the European Union indicate ignorance either or anti-Israeli values."
The Israeli Foreign Ministry also had some harsh words, saying "There is not the slightest doubt that the Modi'in [is] an integral part of Israel, and their future is not in question. 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 on 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."
"The European Union's move comes after recent announcements that South Africa and Denmark have banned goods produced in Israeli settlements from being labeled as made in Israel," two Israeli lawyers Gil Nadal and Omer Wagner told Haaretz.
"In our opinion, the European Union's interpretation of the term 'the State of Israel' as it appears in the trade agreement constitutes a deviation and breach of contract."
Who might benefit from this change in borders?
Manufacturers who are exporting from the settlements. The online news service Artuz Sehva reported that some Israeli manufacturers in Judea and Samaria have welcomed the distinction, because the label "Made in the Settlements" boosts sales.