THE North American Free Trade Agreement (NAFTA) might make Mexico more attractive than Asia as a cheap overseas manufacturing base for some United States manufacturers, air cargo industry leaders were warned in Hongkong yesterday. But there is doubt about whether Mexico will have the necessary infrastructure to cope with predicted increased air and land transport demands. The message was delivered to the International Air Cargo and Express Conference by Mr Buz Whalen, Japan Air Lines staff vice-president for cargo in the Americas, who has researched the issue. At the same conference, British Airways' senior manager for commercial services, Mr Lew Llewellyn, told delegates they should downgrade their forecasts of world cargo volumes for the rest of the decade. Mr Whalen said: ''Several educators in the United States feel that Mexico compares favourably with some Asian nations in being able to provide the positive factors that first influenced United States-based companies to begin offshore manufacturing in Asia. ''The obvious factor is the cheap and virtually unlimited labour supply in Mexico. ''Many members of the Mexican labour pool are unskilled, but a similar situation did not become a lasting problem in Asian countries when United States and Canadian electronics firms established their plants in Asia, beginning in the late 1960s.'' As labour costs rose in one country, US firms would move to the next unused territory in Asia and begin the construction, training and manufacturing process again. Distance had worked in favour of the long-haul air cargo handlers, but NAFTA - if ratified by its three prospective members, the US, Canada and Mexico - might change the pattern of trade to and from the American continent. NAFTA seems a natural follow-on to the Free Trade Agreement between the US and Canada that came about in 1988 and significantly increased trade between the two countries. Business analysts said Mexico stood to gain most from NAFTA. But Mr Whalen warned: ''There is great concern in both Canada and the United States about the transportation infrastructure in Mexico. ''Will it be capable of moving the vast increase in cargo that is sure to come for all modes of transportation?'' He said: ''The cargo handling capability at Mexican airports is suspect. Once past Mexico City, there is limited capability for freighter access or availability of the proper ancillary equipment for freighter handling.'' And little freighter capacity was available in the Mexican market, he said. The wide-bodied passenger aircraft in service were not capable of handling current cargo demand in their bellies, let alone any increased demand likely to be generated under NAFTA. US and Canadian semiconductor firms have begun buying raw materials in Mexico. Maquiladoras - Mexican companies set up to manufacture using cheaper Mexican contract labour and materials with foreign management, technology, components and financing - have been flourishing for more than 10 years. Most have operations on both sides of the border between the US and Mexico. Mr Whalen said: ''Given the very economical Mexican labour pay scales and the proximity of these operations to United States-based electronics firms, there will surely be an increase in sourcing and sub-assembly operations, which may have a telling effect on transpacific air cargo.'' Meanwhile, Mr Llewellyn said that during the 1980s, major aircraft manufacturers were working on the basis that world cargo volumes would double by the end of 2000. But, he said: ''We now believe that to be unlikely, although current levels of growth will continue to provide us with many more opportunities for our industry over the next five to 10 years. ''In British Airways we believe that we will be in a position to continue to supply our customers with a reliable cargo product and add value to that which we have been seen to deliver in the 1980s with new products and services. ''However, we also believe that providing a reliable quality product will not be sufficient to meet new demands from the trade. Distribution will be the future key to the marketing effort.''