Williams, who took Cuthbert's place on the wing during the Six Nations, will miss Wales' first two warm up matches following foot surgery.
Ex-Wales centre James says Cuthbert faces a big task to win the shirt back.
"He'll be very lucky if he gets back in," he said. "I don't think he's put his hand up this season."
Cardiff Blues' back Cuthbert, 25, has not played for Wales since their 26-23 win over Scotland in February at Murrayfield, their second match of Six Nations.
He was left out of the matchday squads altogether for their three remaining fixtures.
The previously prolific Cuthbert failed to score in 11 of the 14 matches he played for his region in the Pro12 during 2014-15, but crossed twice in their final fixture of the campaign against bottom side Zebre.
He has been included in Wales' 47-man World Cup training squad which will be trimmed down to 31 at the end of August and James told Radio Wales Sport that the winger needs to improve.
"It's down to mental attitude possibly," the 2001 British Lion said. "It depends how he goes in the training camp.
"If I was in the training camp and I was one of the backs I'd see this as a massive opportunity to really step up my game, show what you can do and put your hands up."
Wales head coach Warren Gatland is "optimistic" Williams, 24, will recover in time to take part in the World Cup.
James says losing the Scarlets' back would be a setback for Wales, who are already without injured centre Jonathan Davies (knee).
"It would be a massive blow," said James. "He's certainly a valuable commodity to have in the back division.
"He seems to create a hell of a lot of try-scoring opportunities, which we've seen him doing time and time again for Scarlets, but also for Wales this season. So let's hope he makes a speedy recovery."

The Keep Military Museum in Dorchester plans to use the money to convert a bunker into an interactive experience.
It also wants to create an online gallery of Dorset and Devon people who fought in the war, and a room for community talks and school visits.
The Keep is the only military museum for the regiments of both Dorset and Devon.
The museum, which is receiving the money from the Heritage Lottery Fund, houses thousands of original and unique exhibits, including the desk belonging to Adolf Hitler and hundreds of items from WWI.
Curator Colin Parr said they wanted to gather stories from people whose relatives had taken part in the war.
He added: "Our volunteers will create an online history gallery which will include a contributory archive for people wishing to share their history with us."
Nerys Watts, of the Heritage Lottery Fund, said: "All communities living in the UK have been affected by the First World War in some way, either by the events that took place, or by the changes it brought about.
"We are keen to support projects that, like this one, enable local people to understand more about the heritage of the First World War and how it touched and changed their community."

With a theme of 'We are One', the parade was led by Mary Ellen Campbell, Belfast's first openly gay deputy mayor.
The Pride festival, which runs over 10 days, finishes on Sunday.
More than 100 events have showcased the creativity, arts, history and culture of the LGBT community in the city.
Festival goers and musicians gathered in Queen's Square before parading through the city centre.
The 'Pride Village', aimed at families and children, was a smoke and alcohol-free zone.
Custom House Square hosted a celebration concert on Saturday evening.
Sean O'Neill, chair of Belfast Pride, said the event is now one of the biggest in the city.
"It keeps getting bigger every year," he said.
"The point of pride is about visibility - bringing LGBT people on to the streets to challenge stereotypes and making a point that we want to be full and equal citizens with the rest of the city."
Alex Cuthbert would be "lucky" to regain his Wales place even if Liam Williams is ruled out of the Rugby World Cup, according to Dafydd James.
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A Dorset museum has been given a £51,900 grant to help commemorate the outbreak of World War I.
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Thousands of people took part in the Belfast Pride Parade through the city centre on Saturday.