Re: Why is the Federation so dumb?
It must've been a means of securing peace. The Federation and the Romulans could have been building up towards war, which was only prevented by the Treaty of Algeron. The UFP gave up cloaking research, perhaps the Romulans gave up something as well.
We don't know what the Romulans gave up, though, but apparently the Federation not pursuing cloaking technology has maintained peace (albeit at times tenuous) with the Romulans.
"Don't sweat the small stuff--it makes you small-minded..."