The way it stands now the player is the only faction that is able to make peace. If an AI factions declares a war on another AI faction: it's a 100-year war. By mid-game, pretty much everyone is at war with everyone else ruining AI economy to the point that in late mid game, the AI is bankrupt to do anything meaningful (read: fun) militarily.
So, should CA disable diplomacy altogether since they seem unable to implement it in a meaningful fashion? OK, maybe they should leave the trade part in, but that is heavily favoring the player now anyway.
Alternatively: the player should make a house rule NOT TO make peace with any AI enemies. That seems to be the only way to keep things reasonably challenging post mid-game (on VH vanilla).
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