Many years ago, I made a business trip to Turkey.  When I went to the airport to fly home, my departure became complicated.  I was booked on Lufthansa. Their ticket counter was abandoned when I arrived at the airport.  The army guy standing nearby – Turkey was under military government at the time – looked at me, raised an eyebrow and asked “Lufthansa?”

“Yes! Lufthansa!” I was happy to find such a helpful person.  He said, “Come back tomorrow.”

I saw an Air France counter at the end of the terminal.  They had a flight to Paris in an hour and were happy to take my Lufthansa ticket in exchange for a seat in “club” class.  The main benefit of club class was that your kneecap didn’t crack if the passenger in front of you happened to recline his or her seat.  That benefit became academic, as my traveling companion and I were the only passengers in the front of the plane.

As soon as we were in the air, I wanted to buy a drink.  A week in Istanbul can have that effect.  Air France was offering beer and wine in club class at no (extra) charge, but I wanted something stronger. In those days, you could pay cash on an airline. I had a wallet loaded with Turkish Lira, not by choice.   I offered a handful of them in exchange for a much-desired and un-Gallic gin and tonic.

As happy as Air France had been to take my Lufthansa ticket, they turned their nose up at my Turkish lira.  If I wanted a drink, I had to pay in US Dollars.  Of course, they would have taken francs – this was pre-Euro – but I didn’t have any.

I see that the US trade deficit in December was the highest it has been in ten years.  This was reported as a “blow” to President Trump.

Possibly he sees it that way.  He shouldn’t.  It’s a sign of good times that our economy is so productive that consumers have a surplus that allows us to acquire the production of other countries as well as our own.  And, unlike the situation I faced on Air France, when the seller would not accept the paper currency in my pocket, the world of sellers outside the US is happy to accept green paper printed by our government in exchange for real, tangible goods and services.  They will take our paper in exchange for items that they have worked hard to produce.

And what will happen to the US Dollars cramming foreign wallets and pockets after the exchange?  When does the “blow” fall?  Some of those dollars will be used to buy goods that Americans produce.  Others will be used to buy services like software, movie distribution rights, patent licenses, insurance, to name a few.  There is more to trade than the exchange of physical goods.  The US has a trade surplus in services.

Non-US persons use dollars to buy US government debt instruments, which helps to finance those fabulous services – VA Hospitals, Social Security offices, military procurement, to name but three – for which the federal government is so well-known.

Still other dollars will be invested in the private economy and will finance construction, factories, purchases of capital goods, not to mention high tech ventures that are more of a gamble.  The dollars that flow out as we buy goods made abroad flow back because the US economy is attractive to investors.

And some dollars will never come back to the US.  There are lots of products traded overseas that are priced in US Dollars.  Civil aircraft and oil come to mind.  In many parts of the world, US Dollars are more welcome as a medium of exchange than the local currency.  Each dollar represents a claim on the US economy; where’s the “blow” when a chit is issued to someone who never redeems it?

I don’t mean to suggest that government has no role to play in trade.  Government has an interest in regulating the purchase and sale of military hardware and strategic materials, not to mention illicit items like drugs and pornography.  There is a legitimate public interest in inspecting food and pharmaceuticals for safety and purity. And government should control commerce with places that are outside the law, such as police states, terrorist states, and conquest states.  Regulating along these lines is in service to acknowledged governmental functions: foreign policy, national security, public safety and health.

More generally, government can facilitate trade in innocent goods and services between honest (or at least not dishonest) parties.  It’s great that governments will for a modest fee maintain ports and roads to facilitate commerce, a court system to clean up the occasional mess, and a central bank to manage the monetary system that lubricates the whole system.

It’s when government wanders from facilitating trade to managing it that problems arise.  Tariffs are too often sought by rent-seeking domestic producers.  The cry that foreigners are “dumping” goods in the US means “I can sell you the exact same thing for a higher price.”  I recall the satire composed by Frederic Bastiat about the candlemakers of Paris.  The imagined candlemakers demanded that government require homeowners to cover their windows to counteract the unfair competition from the Sun, who supplied light for free, which undercut the candlemakers and deprived them of their livelihood.

The deficit on visible trade may be a “blow” to Mr. Trump because he insists, against all the evidence, that it’s a loss to the US when a US person buys something produced outside the US.  His political opponents will argue that the trade deficit shows how his policies have failed.  If you’re not engaged in politics, it’s good news.