When the legislation is finalised, likely next year, manufacturers must specify the country where the majority of their product was originally made on the label.
Currently, foreign manufacturers can claim a product was 'Made in the EU' when it only underwent minor assembly in the bloc. That could mislead consumers who are looking for local craftsmanship or want to support local businesses.
The new requirements could affect billions of euros' worth of goods that are imported into Europe yearly, especially from Asian countries. If consumers turn away from some foreign-made products, that could help boost European production and employment levels as local businesses step in to fill in the gap.
The new labels would be "an important way of responding to people's concerns on quality and safety," said French MEP Kader Arif, spokesman on international trade for the Socialists & Democrats group in the European Parliament.
The new rules still need backing from EU member states in the Council of Ministers, where distribution-heavy states such as Sweden and Britain are concerned about red tape and falling profits. Others, including Italy, Spain and Portugal, have long pushed for mandatory 'Made In' labels, which they hope will act as a brake on growing low-cost imports.
'Enormous' business impact
The decision could have an "enormous" impact on many companies, especially small firms and the retail industry. Complying with the rules may also be a financial burden for many small companies still reeling from the economic slowdown and tight credit markets, said Dennis de Jong, a Dutch Socialist member of Parliament.
The regulation also does not take into account products made under 'Fair Trade' practices designed to ensure such principles as the rights of children, respect for cultural identity and safe working conditions, he said.
"My argument was this was a short-term fix," he said. "In the longer term, people are not interested in the country, they are interested that the product was made properly, without child labour and with respect for the environment."
Likewise, the European Association of Fashion Retailers argued that identifying one country is misleading because the fabric for a shirt could come from Portugal, for example, but the sewing could be done in Egypt.
"We're not happy at all with the outcome of the plenary vote," said Alessandro Bedeschi, the association's secretary-general.
Catching up with EU trade partners
Wednesday's vote puts the European Union's policies more in line with other countries, including Canada, Japan and the United States, which has had a labeling policy in place since 1930.
But there is no international standard for labelling. So a product that might have to be labeled 'Made in Vietnam' under the EU law might be 'Made in China' under US law, according to the retail organisation, which wants labeling to remain voluntary.
The rules will mean that if only 25% of the products are made in the EU, manufacturers cannot claim they are EU-made, and Cristiana Muscardini, an Italian MEP and member of the European People's Party (EPP), said the rules would put EU consumers on "the same playing field as of the consumers of our major trade partners".
