By Alan Murray and Geoffrey Smith
March 14, 2017

Good morning.

The big news this morning is that President Trump and Chinese President Xi Jinping will meet together at Mar a Lago in April. This is no small thing. During the election, candidate Trump expressed as much disdain for the Asian nation as he did for Hillary Clinton and Marco Rubio. A YouTube video of Trump just saying the word “China” garnered more than 10 million views. Now he’s bringing the enemy to home turf, to practice the art of the deal.

What would a deal look like? Last night, I asked FedEx CEO Fred Smith, at a dinner in New York that is part of the run up to the Fortune Global Forum in Guangzhou this December. Smith is in a unique position to speak on this issue. He chaired the U.S.-China Business Council back in 2001, and was an outspoken advocate of China’s entry into the World Trade Organization. These days, he’s become critical of policies on both sides of the Pacific. President Trump’s repudiation of trade agreements is a bad move for the U.S. economy, he believes. And President Xi’s new embrace of globalization belies a history of protectionism—including, Smith says, “an overt attempt to retard” FedEx’s growth in order “to promote local champions.”

Smith was optimistic that a deal between Trump and Xi could be productive. He said President Trump has already begun the negotiation by backing off his suggestion that the U.S. might abandon its support for the “one China” policy. Now it’s China’s turn to move. It needs to liberalize its economy and abandon its support for “indigenous innovation” at the expense of foreign competition. “That’s the basis of the deal,” Smith says.

Smith noted that those moves would be good for the Chinese economy as well as foreign competitors. Deregulation in the U.S. between 1970 and 1990 enabled companies like FedEx to drive logistics costs down from 16 cents of every dollar spent on a product to 9 cents, he says. In China, the cost is still 18 cents on the dollar, because of “too much regulation at the local level, provincial level, and national level.”

You can watch Smith’s comments here. More news below.

Alan Murray
@alansmurray
alan.murray@fortune.com

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