New Zealand Prime Minister Jacinda Ardern speaks during an event. File photo

Damien O'Connor said the Canadians are "not living up" to promises made under a 2018 trans-Pacific free trade agreement to allow dairy products into Canada.

"This is impacting New Zealand exporters, who remain effectively locked out of the Canadian market," O'Connor said in a statement.

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The Comprehensive and Progressive Agreement for Trans-Pacific Partnership was signed in 2018 by Canada, New Zealand and nine other countries in the Asia-Pacific region.

New Zealand first said in May it had beef with Canada's administration of tariff rate quotas to allow dairy products to be imported with lower import taxes.

Justin Trudeau speaks during election campaign. File photo

New Zealand started dispute settlement proceedings against the Canadians over lost dairy market access — worth about $40 million over two years — which "did not resolve matters", O'Connor said.

"New Zealand has therefore made the decision to request the establishment of a panel to hear and decide the dispute," he said.

New Zealand Prime Minister Jacinda Ardern revealed on Monday that she had already told her Canadian counterpart Justin Trudeau "to his face" that her nation would escalate the trade dispute.

"I think it would be unusual that given the amount of contact we have for me not to raise the issue. Our relationship with Canada means I can be very forthright," Ardern told reporters in Wellington.

She said she had told Trudeau "we were at an impasse" and that Ardern didn't "see any reason why we should have officials continue a back and forth" which would only "waste time".

"If we can speak frankly as leaders and know we are between ourselves not going to be able to resolve it, it was time to escalate. That's what we've done," Ardern added.

There has been no official response from Canadian representatives. Diplomatic officials in Wellington said a response would have to come from Ottawa.

The government in Wellington wants three experts on the neutral panel, to be chosen by Canada and New Zealand, to settle the row.

Global dairy exports contributed $10.96 billion to New Zealand's economy in 2021 which was around 23 per cent of total exports.

Agence France-Presse