Such a move would constitute a dramatic downgrading of ties, but is not the same as breaking off diplomatic relations.
There are now over 150 illegally established settlements in the West Bank, all in violation of International Law, as outlined in the 4th Geneva Convention.
Israel reacted angrily to the proposal calling it "populist, unsafe and extremist", while a spokesperson for the PLO expressed "sincere appreciation" for the initiative.
Ministry spokesperson Emmanuel Nahshon also declined to comment on Liberman's tweet.
The Ireland-Palestine Solidarity Campaign welcomed Seanad vote (25 for, 20 against) in support of Senator Frances Black's 'Control of Economic Activities (Occupied Territories) Bill.
Nonetheless, Irish Sen. Frances Black, who sponsored the legislation, called on colleagues to support the bill "to state firmly that Irish foreign policy will always stand on the side of global law, human rights and justice".
Today, despite its subordinate position within the European Union behind such larger powers as France and Germany, Ireland has played an outsized role as a voice on matters concerning Israel and the Arab-Israeli conflict. "The absurdity of the initiative of the Irish Senate is that it will damage the livelihood of many Palestinians working in Israeli industrial zones affected by the boycott", warned the Israeli foreign Ministry.
The Palestinians, meanwhile, celebrated the vote.
"Today the Irish Senate has sent a clear message to the worldwide community and particularly to the rest of the European Union: the mere talking about the two-state solution is not enough without taking concrete measures".
The Joint (Arab) List also welcomed the bill, saying it hoped it would "mark the beginning of a new stage in which Israel starts to pay an global political, economic and moral price for its actions".
All parties except the ruling Fine Gael endorsed the bill.
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The minority-government in Dublin, however, opposed the bill.
Irish Foreign Minister Simon Coveney said on Wednesday that it risked "fanning flames" in the Middle East.
While Coveney said he could "emotionally connect" with the bill, lamenting the "deep injustice" that Palestinians have suffered for decades, he argued that there were important legal and political reasons to oppose the bill. It suggests that simple labelling is not enough and proposes to enforce global law by banning goods produced within illegal settlements.
Knesset members had mixed reactions to the passage of the bill.
It, however, is a shame that Ireland was forced to take this first step alone, as the European Union seems more interested in appeasing Israeli colonialism and oppression than in defending the rights of Palestinians.
The Israeli embassy condemned the bill, deeming it "populist" and "dangerous", warning that it would have a negative impact on diplomacy in the Middle East. Now, Haaretz reported, "the bill is expected to pass, thanks to votes from opposition legislators and independents".
According to the draft law import or attempt to import from settlement would be committing a crime punishable with up to five years in prison or 250 thousand Euros fine.
A bill banning the importation of Israeli goods produced on Palestinian territory has passed in the Seanad.
The legislation now faces eight stages that include a committee meeting and a vote in Dáil Éireann, Ireland's House of Representatives.
It summoned the Irish ambassador for clarifications over the proposed legislation when it was first introduced in January. "The bill is focused [solely] on the sale of products from settlements and not on trade within the Green Line", she said in defense.