The amendment was tabled by the new leader of the DUP in Westminster, Sir. Jeffrey Donaldson.
It was defeated by 337 votes to 262.
The amendment received cross party support from the DUP, SDLP and the Alliance Party in the House of Commons.
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The UUP, Sinn Fein and Northern Ireland business leaders also backed the amendment.
The amendment was designed to legally guarantee Northern Ireland "unfettered access" to the UK market.
MPs had the opportunity to debate the amendment before the vote.
Parliamentary Under Secretary of State for Northern Ireland, Robin Walker, told MPs the amendment was unnecessary as the withdrawal agreement bill already provides sufficient legal guarantees.
DUP MP for East Antrim, Sammy Wilson and SDLP MP for Belfast South, Clara Hanna both challenged Mr. Walker.
The amendment was also supported by the Northern Ireland Retail Consortium (NIRC).
“The amendment to the Bill may have failed to be passed by a small margin but a stark warning has been raised that this current protocol will have damaging effects for our households and economy," said NIRC Director, Aodhán Connolly.
"The narrative that Northern Ireland is sorted has been broken.
“We want to hold Minister Walker at his word when he said from the dispatch box.
"This deal is a good deal for both businesses and individuals in Northern Ireland.
"Our challenge to him is prove it."
Mr. Connolly added: "Tell us how he will do away with the complexity and costs for NI businesses and households that will come because of the provisions in the Withdrawal agreement.
"Show us where the mitigations, derogations and compensation is outlined so that we can have certainty.
"For us the fight will go on in the House of Lords, at Committees and with the EU. We are determined to protect NI families and the affordability and choice they enjoy," he stated.