Creating an artificially easy sandbox for your local engineers and entrepreneurs by banning the competition will not lead anywhere good. Competing with the best forces you to improve; playing on easy mode leads to stunted skills and inflated confidence - and worse products, companies, and economies.
It isn't banning the competition. It's forcing the external competition to follow the same rules as the locals w.r.t. privacy laws. The fact that the external competition can't comply means that there's a market niche available which locals have an opportunity to exploit.
