… is from page 319 of Bob Higgs’s insightful essay “Against the Whole Concept and Construction of the Balance of International Payments ,” which appears in the Fall 2018 issue of the Independent Review (citation deleted):
The root of a great and destructive economic misunderstanding can be traced to an accounting statement known as “the balance of international payments.” As the name suggests, this accounting statement rests on the idea that nations (in the form of their resident individuals, business firms and other organizations, and governments) trade with other nations (similarly composed). But the aggregation of the individuals, business firms and other organizations, and governments in accordance with the country in which they are located sets in motion a basic misunderstanding that economists have been unable to root out even in two and a half centuries of trying.
In reality, individuals, business firms and other organizations, and governments trade with other such entities, some of which are located in the same country and others of which are located in other countries. The location of the trading partners has no economic significance whatsoever. Trading entities enter into exchanges voluntarily, each one in each transaction anticipating a gain from the trade. Hence, in expectational terms, every such trade entails a gain from trade – in other words, an addition to the trader’s wealth.