It may not be as daft as it sounds?
Skimming the RFC, it seems to me that it is more about removing the USA/international bias of existing directory names, more in line with the telephone numbering system. I can dial a local number without the preceding country and area codes, using the extra codes only when calling out of area. This is not the case with the current DNS.
Under this proposal, within Australia, for example, "www.gov" would address the site known elsewhere as "www.gov.au", and so on with "www.gov" in New Zealand being known globally as "www.gov.nz" . This could reduce the mixture of domestic sites, some within ".com" and others within ".com.CC", and reduce the privileged status of the so-called international domains that fall under US control. (This last point may be the real drive behind the proposal.)
Adopting this in Canada would allow "www.IBM.ca" to be referred to locally as "www.IBM", achieving what ICANN wants to charge buckets of cash for. Of course in the UK, allowing the local country code to be dropped from ".co.uk" could be confusing for Colombians. So there are both swings and roundabouts.