Re: Why can't the Federation use cloaking technology?
The Federation has been shown in the past utilizing a type of cloaking technology when dealing in Cultural/Pre-Warp observation scenarios such as Duckblinds and Encounter Suits. There is also the example of the Cloaked Holoship from Insurrection
but the books have pointed to Section 31's involvement there as the reason for the cloak existing.
All in all, the Federation has the ability to cloak things, but apparently not in a way that breaks the Treaty of Algeron.
"You fool! You've fallen victim to one of the classic blunders! The most famous of which is "Never get involved in a land war in Asia", but only slightly less well known is this - "Never go in against a Sicilian, when death is on the line!"