The 29-year old former Everton and Birmingham City man is returning to form and fitness with the Well after returning to the club in February but McGhee says he is not yet ready to be involved at international level despite showing some glimpses of his glory days.
"I saw the Motherwell game (4-1 win over Hibernian in which McFadden scored) and James was excellent. He is 29 and is still a really top player in Scottish terms," said Gordon Strachan's right-hand man McGhee.
"The fact he has only played one 90 minutes in three years is the reason he is not in the squad.
"But he is still young enough and has that ability.
"If he is playing 30 or 40 games next season, then I can't imagine he would not be back in contention.
"If James feels he has the desire to play at the highest level possible I can't see any reason why he would not be in the Scotland squad."