Australia's credibility is on line: Arabs

The Abbott Government has moved to an extreme position on the conflict between Israel and Palestine, the nation's peak Arab business group has warned.

As Foreign Affairs Minister Julie Bishop argued there had been no change in position, the Australia-Arab Chamber of Commerce and Industry said the Government had put itself at odds with world opinion while risking trade links.

It comes after recent comments by Attorney-General George Brandis that the Government would no longer use the word "occupied" in reference to East Jerusalem and would instead use the term "disputed".

In response, 20 ambassadors representing 20 Islamic countries sought an emergency meeting with the Department of Foreign Affairs and Trade on Thursday to express their anger.

The Arab League, which includes major trading partners including Iraq, Egypt and the UAE, is set to debate the issue in coming weeks with member states expected to call for a suspension of imports of Australian farm produce.

In a letter to _The West Australian _, chamber of commerce chief executive Suzannah Moss-Wright said both Senator Brandis and Ms Bishop had made inflammatory and regrettable statements over the issue.

She said it was difficult to see how Australia could make any meaningful contribution to international efforts to resolve the debate over East Jerusalem and land claims across Palestine.

"Such clear bias undermines Australia's credibility in both diplomatic and trade circles and puts at risk business relationships with the Arab world currently worth $15 billion a year," she wrote.

"Our Arab friends do not expect us to turn our back on friendship with Israel, but they do expect us to be balanced and to avoid provocative actions that trample over the interests of the Palestinian people in this tragic and long-running dispute."

Her comments follow General Delegation of Palestine to Australia ambassador Izzat Abdulhadi's disappointment that Prime Minister Tony Abbott had not apologised and reversed the Government's new position.

Ms Bishop, who expected to meet representatives of Arab League nations this week, denied that the Government had changed its position.

"What Attorney-General George Brandis did was state the fact that the Australian Government does not refer to East Jerusalem by any name other than East Jerusalem," she told the Ten Network.

Mr Abbott said though the Government may have adopted stronger pro-Israel language it did not mean it had abandoned support for a separate Palestinian state.

"There has been no change of policy, absolutely no change in policy. There's been a terminological clarification," Mr Abbott said in Houston, Texas.