The dreaded S-word — sequestration — loomed over a Canada-U.S. conference on Beyond the Border initiatives Monday as an American official acknowledged U.S. budget woes were slowing progress on a host of fronts.

"It is fair to say we are facing some very difficult budget constraints," Ana Hinojosa, a director at U.S. Customs and Border Protection and a member of the Beyond the Border Initiative, told the meeting.

Sequestration is a massive package of sweeping, automatic spending cuts to an array of U.S. federal departments and agencies set to take effect on March 1.

If Congress fails to come up with a deal on spending cuts in the weeks to come, sequestration will thrust Americans into an age of austerity that threatens to bring to a halt some of the projects envisioned by Beyond the Border.

The Canada-U.S. border agreement, announced with great fanfare by U.S. President Barack Obama and Prime Minister Stephen Harper two years ago, is aimed at easing the flow of goods and travellers over the border by sharing intelligence and harmonizing regulations.

The Canada-U.S. boundary has been plagued by delays, red tape and out-dated regulations for years, especially in the aftermath of the terrorist attacks of Sept. 11, 2001.

Maryscott Greenwood of the Canadian American Business Council asked the Beyond the Border panel whether the U.S. fiscal crisis means "there will not be any expansion of pre-clearance at airports in Canada, and that, if anything, we are looking at cuts?"

Hinojosa replied: "We have to be very conscientious about where our resources are ... being able to expand to other areas would be very difficult."

That's bad news for airports in Canada, in particular Toronto's island airport. Porter Airlines, which now flies to Washington, Chicago, Boston and New York out of Toronto, has been negotiating for months to bring U.S. customs to the Billy Bishop Toronto City airport.

At the event hosted by the U.S. Chamber of Commerce, senior bureaucrats from both countries — all of them working on Beyond the Border or the bilateral Regulatory Co-operation Council — emphasized the progress that has been made in several areas in the first year of the Beyond the Border two-year action plan.

They pointed to the expansion of Nexus, a Canada-U.S. program that allows frequent, pre-screened travellers to breeze through customs at airports on both sides of the border.

Security checkpoints

The U.S. Homeland Security department and Canada's Border Services Agency have also begun work on a plan to create security checkpoints at designated areas away from the border to ease congestion and promote efficient passage of visitors and goods.

"North America is back," exclaimed Patrick Kilbride, the director for western hemisphere affairs at the chamber.

Kevin O'Shea, a Canadian member of the Beyond the Border implementation team, said he wasn't worried that sequestration would significantly slow down progress.

"I have great faith in the U.S. political system," said O'Shea, who spent six years at the Canadian Embassy in the U.S. capital, working on border and security issues.

He added that Canada is playing "a bit of catch up" in terms of investing in the border, following the American lead, and therefore budget cuts in the U.S. shouldn't pose any serious problems.

"Tremendous progress has been made," he told the conference. "Our departments and agencies have been working at a tremendous pace to lay the foundations for all of the initiatives."

But one stakeholder, Birgit Matthiessen of the Canadian Manufacturers and Exporters, said Monday's roundtable "confirmed my anxiety level in terms of the slow pace and deadlines having been missed."

Behind schedule

Matthiessen called it "dismaying" that officials admitted a push to facilitate cross-border business travel at land crossings — one of the biggest headaches plaguing the border — was behind schedule.

A progress report was due late last year. O'Shea said he was hopeful "that in the coming months the report will be out."

"It concerns me that there has been a stalemate and that we're not going to see any action in this coming year," Matthiessen said, adding that a commitment from the "very highest levels of government" had been made on the issue two years ago.

She added that budget woes shouldn't be holding up most of the outstanding items on the action plan.

"I assume that some specific issues would require additional funding on the U.S. side. But across the board, generally speaking, the initiatives that are most important require bold policy-making rather than opening up the public purse."