What problem does this feature solve?

The SFC compiler only preserves whitespace in pre tag, if you want to preserve whitespace when passing content to custom components or tags that require whitespace preservation you have to contort yourself to pass content wrapped in a pre tag. It would be nice to have some directives that preserve whitespace in any arbitrary tag so this isn't necessary.

What does the proposed API look like?

<template>
  <CodeBlock language="javascript" v-preserve-ws>
const name = "World";
console.log(`Hello, ${name}!`);
  </CodeBlock>
</template>

html does not allow stacking regular space; it is a feature of HTML, not vue.

from a comment of https://stackoverflow.com/questions/65381611/add-whitespace-in-vue.

You can already build such a directive.

In your example, the content inside CodeBlock is passed to the default slot. You can intercept it in the directive, then convert the content to a string and display it.