A suggestion would be to do away with team colors altogether. No more, Red, Black, Blue, Brown, etc. Now you trade with whom you wish to, and can economically cripple other alliances simply by not trading with them. Even in a large alliance, if other alliances hold your alliance in distain, external trades will be hard to come by.
How many trades do most people have outside of their own alliance now to better their nation? I would imagine it is a majority of players. Internal alliance trades will benefit most but not all, and the alliance will lose members, not gain them. An individual nation will wield more power with who they will, and who they won't trade with.
People on weaker color spheres won't have to concern themselves with the difficulty of obtaining trades. The +1 Happiness bonus can instead be rewarded for length of the trade, if a trading partner exceeds 30 days both nations are rewarded with a +1 Happiness bonus for the trade.
What about team senators? Abolish them, there wouldn't be anymore need for them.