The BGP (Border Gateway Protocol) is the single inter-domain routing protocol that enables network operators within each autonomous system (AS) to influence routing decisions by independently setting local policies on route filtering and selection. This independence leads to fragile networking and makes analysis of policy configurations very complex. To aid the systematic and efficient study of the policy configuration space, this paper presents a reduction calculus on policy-based routing systems. In the calculus, we provide two types of reduction rules that transform policy configurations by merging duplicate and complementary router configurations to simplify analysis. We show that the reductions are sound, dual of each other and are locally complete. The reductions are also computationally attractive, requiring only local configuration information and modification. These properties establish our reduction calculus as a sound, efficient, and complete theory for scaling up existing analysis techniques.