By itself, Google Chrome is able to load folders, you can use this
thing with the input element. But browser support this is not very good, so Google Drive is likely used by something else- for example you mentioned File API (it is likely that for different browsers they give different implementation).
If you about where my Chrome generally has read rights, then the answer is simple, and, most likely, was prelisten somewhere in the middle of the user agreement. By the way, if in the address bar in Chrome to enter file:///
it turns out "Medialogy Manager" - reads a file starting from the root (in Linux)