I do not see this as collusion so long as league rules do not prevent it. He is clearly willing to give something up to make this happen, in this case a #1 pick. How can it be collusion when someone is giving something to get something and the type of transaction is not prohibited by the league rules.
If you do not think the price he is paying is high enough, the negotiate. If it is a good keeper, it shoudl be worth more than a #1 pick. He will have to drop the player otherwise, so you have all the leverage. But don't cry collusion when the real issue is that you not negotiating well.