The specific bit about cloaks there always felt a bit forced to me, not flowing naturally from the rest of the plot, but yeah, it's an explanation.
For all we know, the Treaty of Algeron was dictated on both the Feds and the Romulans by an outside force, much like the Treaty of Organia. Although it also seems probable that only the truce of Organia was forced on our heroes and villains, and the contents of the treaty were then created by the two sides when both found the short respite from fighting advantageous.
Perhaps the UFP and Romulus went to a bitter war in the 2290s when the complicity of Romulans in all that ST6 nastiness was revealed, and some of the big boys then stepped out and put a stop to that? Once forced to negotiate, both sides decided to give up something they felt they didn't need, to make it look good - and fighting advantages were cheap currency now that fighting was forbidden anyway.