The Federal Government has launched formal action against Canada over wine imports.

Federal Trade Minister Steven Ciobo has initiated dispute settlement action with the World Trade Organisation (WTO), after the local industry argued that Canadian provincial (state) governments are engaged in discriminatory and protectionist behaviour.

Reports say the Australian Winemakers’ Federation has been pressuring the government to take up their plight.

Winemakers' Federation chief Tony Battaglene says provincial governments own the statutory authorities that market and distribute wine within their own jurisdictions, and those government monopolies push revenue to government coffers.

“Some of the methods include keeping the price of local wine product artificially low while increasing the mark-up value on imported wines,” he told the ABC.

“They are providing alternative routes to markets by opening up liquor sales in grocery stores which only stock domestic labels.

“Elsewhere they also offer exclusive access to retailers and restaurants for Canadian brands.

“That's in provinces like Nova Scotia, British Columbia and Quebec, where the Liquor Control Board of Ontario is the biggest wine buyer in the world.”

Canada is Australia’s fourth-largest wine export market, worth $198 million a year.

Mr Battaglene says he is aware that there could be a consumer backlash in Canada.

“The [federation] is spending millions of dollars in marketing into that North American market over the next few years,” he said.

Other major wine exporters may join the action, but the United States has already started.

In January 2017, the Australian Government joined the US as a third-party observer in trade enforcement action against Canada in the WTO.

But the Northern American Free Trade Agreement (NAFTA), which began soon after, may have allowed the US to secure preferential access to the Canadian market.

“We make ourselves immune to that by launching our own actions,” Mr Battaglene said.

“That is why we urged Mr Ciobo to launch our own trade enforcement action now, and by pulling that lever we have protected ourselves.”

After a 60-day consultation period, if the issue is not resolved by bilateral agreement, it will be put before a panel that could take up to a year to reach a resolution.