The Oxford Handbook of International Commercial Policy may not sound like a cozy read, but for someone interested in how national policies affect flows of international trade, it is interesting, clear, and without the usual clutter of complicated mathematical equations so often found in economics journals. Lawyers, policymakers, and political scholars (as well as economists) should be comfortable reading the arguments. The Oxford Handbook is a volume of 15 chapters: the first seven describe general approaches to commercial policies while the last eight present studies of trade policies for particular countries or regions.

The book begins with a description by Sven Arndt of the standard models showing the welfare impacts of trade barriers, export subsidies, and other related trade policies. The chapter makes the case for free trade as a welfare-maximizing policy and then shows how the introduction of market distortions makes the case for free trade less clear. The chapter is a good primer on the issues in trade policy, and it is easy to understand why the editors wanted to begin with a textbook-like discussion of models that could be used as a framework for understanding the arguments laid out in the subsequent chapters. None of the subsequent chapters really linked back to the models presented, however, so this first chapter felt somewhat isolated from the rest of the book.

Rachel McCulloch follows in the second chapter with a description of the World Trade Organization, GATT/WTO principles, and the challenges lying ahead in the international trading system. This chapter would be great reading for an international trade class or for policy makers wanting a clearer understanding of how the world trading system works. McCulloch highlights a number of issues that make continued trade liberalization difficult. The Doha Round remains stalled more than a decade after talks began, the enormous bilateral trade imbalance between the United States and China makes tariff negotiations based on reciprocity more difficult, and the proliferation of regional trade agreements (RTAs) means that there is an increasing divergence between the WTO's most favored nation (MFN) principle and the reality of wide tariff preferences given to RTA partner countries. McCulloch suggests that moving forward may require both a completion of the Doha Round negotiations and a way of channeling RTA formation along a path to multilateral liberalization.

In Chapter 3, Alfred Eckes Jr. describes how trade policy is administered. His key argument is that the World Trade Organization and other groups administering trade policies are increasingly dominated by lawyers, with relatively few economists retaining important decision-making positions. He gives several reasons why lawyers have taken over administration of the trading system that was largely shaped by economists and diplomats after World War II. One is that trade negotiations have become much more complex in the past few decades as they began to cover areas such as investments, intellectual property, and services that go beyond the initial focus on tariffs and quotas on goods trade. Second, dispute settlement procedures and greater review of trade policies by courts and legal commissions have encouraged a move to a more judicial view of trade policy administration. The ‘judicialization of trade policy’ is costly and time-consuming, however, and may lead to inefficient trade policies.

The next chapter, by Carl Davidson and Nicholas Sly, reviews the recent theoretical literature on trade and the labor market. This chapter discusses what new models suggest about how trade affects the distribution of wages in the economy, worker–firm matches, and other aspects of the labor market when there are skill differences between workers within a country. The models raise some interesting issues about labor markets, but the discussion is highly technical and primarily theoretical, so the target audience is probably researchers who are interested in the area and have advanced graduate school training rather than a more general audience.

Tim Josling then discusses agricultural policies. Agriculture is a sensitive industry in trade talks for many countries, and there has been a general reluctance to liberalize trade flows in the area. Agriculture was omitted from much of the early GATT rounds of tariff reductions, and it has proven to be a major stumbling block in the Doha Round negotiations.

In Chapter 6, Mordechai Kreinin and Michael Plummer analyze preferential trading arrangements. The vast expansion of RTAs is arguably the most important development in trade policy in the last several decades, and the authors present several arguments that RTAs are beneficial: RTAs can improve efficiency by increasing intra-regional trade flows, small bilateral agreements are more likely to be successfully negotiated than multilateral deals with well over 100 countries involved, and RTAs can help countries commit to a more liberal trade regime or to domestic policy reforms. The downsides of expanded regionalism include the problem that a country's imports from outside the regional trading bloc may be diverted to less efficient countries within the bloc due to the tariff preference they get (trade diversion). The chapter provides a very clear description of the ways that the trade effects of regional agreements are estimated. One important discussion missing from the chapter was a consideration of how countries choose their preferential trading partners and how this selection of partners complicates estimation of RTA trade effects: higher trade flows within RTAs may be caused by the tariff preferences or because countries choose RTA partners with whom they have significant trade.

The seventh chapter, by Cristiane Carneiro and Gary Hufbauer, describes the development of a rules-based trading system. In trade, as in other areas, countries have incentives to take actions that benefit themselves but harm their trading partners. The stronger these incentives are, the more countries need tight rules and regulatory systems that constrain their own behavior and that of their trading partners. The need to maintain good reputations then encourages each country to follow the rules. The initial GATT rounds placed only modest requirements on countries to modify their behavior, but with the easy tariff reductions already agreed to and more sensitive areas of negotiation in the current talks, the difficulty of reaching a consensus among all the WTO members has led to a stalemate in the Doha Round.

The last eight chapters in the book provide case studies of the commercial policies of individual countries or regions. Robert Baldwin discusses United States trade policies and Patrick Messerlin summarizes those of Europe. Masahiro Kawai and Shujiro Urata discuss the commercial policy in Japan since 1985. Ganeshan Wignaraja compares India and China, i.e. two large developing countries whose growth has been one of the most important stories in the world economy since 1980. Peter Lloyd then analyzes the trade policies in Australia. The European transition economies are described by Torbjörn Becker and Anders Fredriksson, while Michael Michaely discusses Israel. The volume concludes with an interesting discussion of the Association of Southeast Asian Nations (ASEAN) by Hal Hill and Jayant Menon.

Several important themes are followed throughout the volume. One was how agricultural policy was a major stumbling block for countries attempting to liberalize their trade. The agricultural sector receives public support in the vast majority of developed countries, and it is often protected through tariffs and import quotas. The treatment of agriculture as a sensitive political industry by the biggest countries in the trade negotiations meant that the GATT ‘produced almost nothing that constrained developed country farm policies’ before the Uruguay Round and it has been an important reason for slow progress in the Doha Round, as Josling notes. The country studies in the book (including those on Europe, Japan, and the ASEAN countries) repeatedly describe the difficulty of removing agricultural subsidies and import barriers. I believe that the book could have benefitted from the addition of a political economy analysis of trade barriers and negotiations. Clearly, the political power of the agricultural lobbies in many countries has contributed to the difficulties of achieving meaningful liberalization of the agricultural sector and its trade. But the agricultural sector is not all-powerful in every country. Peter Lloyd notes that Australia and New Zealand have the lowest assistance to agricultural producers of any of 78 countries in a World Bank database on distortions in the agricultural sector. It would have been helpful to have a fuller description or modeling of why certain sectors such as agriculture receive so much weight in the minds of policy makers in many countries and whether anything can be done to promote trade liberalization in the face of such determined opposition from powerful political groups.

A second theme emphasized in the book is the importance of concluding the Doha Round negotiations. Not only would a new multilateral agreement provide the traditional benefits from greater openness, but it would also make the many new regional trade agreements more efficient since trade diversion is less of a concern for preferential trading partners if countries' MFN tariffs are lower. Wignaraja echoes the sentiments of many of the authors promoting the importance of finishing the Doha Round when he argues: ‘Concluding the WTO Doha Round offers the best insurance against rising protectionism and a modest deal is better than no deal at all.’

In general, the book highlights the successes of a world trading system that is considerably freer than it was in the years immediately after World War II. The negotiations that led to this system were consensual, so they required all participating countries to buy into the same vision of the world. The last line of the book describes the most important success of the ASEAN Free Trade Agreement, but it could equally well apply to the WTO: its ‘greatest achievement may have less to do with what it prescribes or mandates, and more to do with what it promotes indirectly through its members’ long-standing commitment to openness'.