More than 120 representatives of states parties to the treaty were unable to reach consensus on the widely used building material also known as chrysotile asbestos, it said in a statement.
The convention's Prior Informed Consent (PIC) list currently includes 39 hazardous substances, including all other forms of asbestos.
Canadian member of parliament Pat Martin, who attended the treaty conference in Rome last week, said that Canada - a top exporter of white asbestos - had pressured major clients such as India, Pakistan, the Philippines and Vietnam to join opposition to the listing.
No substance can be added to the watch list without consensus agreement among the states parties.
"Canada should hang its head in shame," Martin, a former asbestos miner and a deputy in the House of Commons with the opposition socialist New Democratic Party, told the Canadian Press news agency.
Canadian health and safety regulations protect citizens against exposure to asbestos, "yet we dump 200,000 tonnes a year into Third World and developing countries and object to having warning labels put on it," Martin said.
Under the convention, exports of chemicals and pesticides on the watch list require the prior informed consent of the importing country.
Exporting countries are responsible for ensuring that no exports leave their territory when an importing country has made the decision not to accept the chemical or pesticide in question.
The pesticide tributyltin, a biocide used in marine paint that is toxic to fish and shellfish, was added to the watch list.
During the conference, "many governments expressed serious concern about the failure to list chrysotile asbestos," the statement said.
The UN World Health Organization reminded participants that chrysotile is a human carcinogen and that asbestos-related diseases claim at least 90,000 lives each year.
The Rotterdam Convention is jointly supported by the UN Food and Agriculture Organisation and the UN Environment Programme.