Most apps on Windows can already access those folders though, except for UWP/AppContainer apps (which require particular capabilities to access them). I think the same is generally still true of the equivalents on most Linux distributions despite that things like SELinux exist.

Microsoft is not giving themselves access to your Docs and Desktop. They're giving you a tool that allows you to give an Agent access to files when you want the agent to do things with those files. If you don't set out to use an agent, none of that even happens. They're not proposing to just add an agent that when you boot your computer scans all your files to come up with random ideas.

Normally, if you just open a random program you installed in Windows, the program also "can access" all the files in your home directory without even asking your permission. That doesn't make Photoshop, notepad or MSPaint malware. They'd be malware if they did bad things with them without your permission, but it's bad faith to assume that Microsoft plans to someday trick you into enabling this feature and using an agent that exfiltrates your files.

Does this not run locally?