The Biblical External / Internal distinction correlates with the Administrative / Substantive distinctions recognized in the Covenant of Grace
Presbyterians doctrinal standards called the Westminster Confession of Faith (WCF) recognizes 2 of the 3 main covenants. Other documents (Such as the Sum of Saving Knowledge, and Savoy Declaration) that followed make clear what was implied in the Westminster standards the third overarching Covenant of Redemption.
However, the WCF has dedicated an entire chapter (Ch 7) discussing both the Covenant of Works, and the Covenant of Grace under the title “Of God’s Covenant with Man”.
The Covenant of Grace is described as being set forth in the time of the law and under the gospel under the name of “Testament”. These comprise the Old and New Testaments (OT,NT) which the Covenant of Grace spans across, but in distinctly different administrations.
Two important distinctions are made in regards to the Covenant of Grace in WCF 7.5 & 6. The distinction of Administration and Substance. This is key to understand, and in fact there is much misunderstanding of it that has led to confusion among Baptists, and errors of the Federal Visionists and others.
What is too often misunderstood is that someone can receive the administrative sign of the Covenant of Grace without participating in the substance of the covenant.
The WCF explains that the Covenant of Grace is administrated during the time of the law (in the OT) through things like: promises, prophecies, sacrifices, circumcision, the Passover lamb meal, and other types of ordinances. The Covenant of Grace is administered under the gospel (in the NT) through the preaching of the word, the sacraments of baptism and the Lord’s Supper. There are not two Covenant of Grace, but one, and substance of the Covenant of Grace is Christ.
Biblically speaking from Paul’s teaching in the book of Romans we can say that the administration of the Covenant of Grace is done externally, and participation in the substance is done internally. Paul describes this important external/internal distinction in Romans 2:28-29, where he speaks of circumcision being of the heart, not merely outward and physical, but inwardly (Also see Colossians 2:11) made without hands, but by God. He continues in the first part of Romans 3 to describe the benefits of being a Jew and of circumcision by describing the benefits of one being surrounded by the oracles of God. That this was an entire belief system to be inculcated into the life of the household of faith in which the covenant child was raised as a Jew.
Paul continues later in Romans with contrasting Jacob and Esau in Romans 9. Paul describes the differences between Jacob and Esau ultimately being God’s election of one and reprobation of the other. In other words, though both were circumcised, and participated administratively in the Covenant of Grace promises, both did not internally have faith, and so we could also say that because of that both did not participate in the substance of the Covenant of Grace. Esau forsook his inheritance because he simply did not internally believe. Esau was never in the Covenant of Grace substantively, but merely received it administratively.
Because there is this external/internal distinction, because not all who claim to believe really do believe, we can also say that all in the visible church are not elect. We can say that all in the visible church are members of the Christ professing community of believers, yet unless they inwardly have faith in Christ, that they’ve never been legally united with Christ, they’ve never been justified. Unless at some point in God’s timing they are born again and then believe internally, they have never participated substantively in the Covenant of Grace.
In the case of pedobaptism, Calvin argues that unless at some point that is joined with faith that baptism is of no use to them. Because a sacrament does not constitute the spiritual reality that it points to and is given the name of, but there must also at some point be an internal faith, which ultimately the timing and the grace offered and promised in the sign is conferred, or not, according to the counsel of God’s will.
God is the one who elects or not, and so we can say that the participation in the substance of the Covenant of Grace (Christ) is ultimately contingent upon God’s secret election. God is the one who from eternity chooses all those who are elect unto salvation. We are chosen in Christ in eternity, and therefore God unites us with Christ, makes us born again, grants us faith and repentance, and preserves us into glory. Salvation is wholly of the Lord. God must grant us faith, so that inwardly we truly believe.
So, the external / internal distinction can be said to corollate to the administrative / substantive categories of the Covenant of Grace, which can also be said to corollate to participation in the visible / invisible church.
A child baptized in the Presbyterian church is considered a member of the congregation and yet not a communing member until they profess faith, because the bread and wine are to be received only in faith. The sign of Baptism is still to be seen as a sign and a seal of the Covenant of Grace, of our ingrafting into Christ. Yet it’s the outward sign of a spiritual reality based on the promises of God, and we are given the honor and solemn responsibility of raising our children in the faith.
The children of believing church members, being baptized are also made members of the Christ confessing covenant community of believers, and so they are made members (yet not communing members until they exhibit faith) of the visible church. We their parents have the full hope and expectation that they will not as Esau did, forsake their inheritance promised in their (external administrative participation in the Covenant of Grace) Baptism into Christ.
We know that our confession teaches that: “The efficacy of baptism is not tied to that moment of time wherein it is administered; yet, notwithstanding, by the right use of this ordinance, the grace promised is not only offered, but really exhibited, and conferred, by the Holy Ghost, to such (whether of age or infants) as that grace belongeth unto, according to the counsel of God’s own will, in his appointed time.” ~ WCF 28.6.
Based on that, it’s clear that we already teach that the baptism itself does not constitute the reality, but that it points to a real spiritual reality as a promise that crosses time. It is really exhibited and conferred by the Holy Spirit (or not, if the person is not elect) in God’s timing.
So, it’s not like a magic spell done by a village shaman, but that it is an ordinance given by God, who is not bound to elect someone to salvation in Christ because they receive the sign, but that God grants an internal faith, or not, in His own timing, based on what we learn earlier in the confession.
That it’s all ultimately based upon Him having predestined some to life before the foundation of that world. That “they who are elected, being fallen in Adam, are redeemed by Christ, are effectually called unto faith in Christ by his Spirit working in due season” ~ WCF 3.6.
We do not consider baptism to be baptismal regeneration the way Rome and the Federal Visionists do. We also do not consider it as Baptists do to be about the sign being only for those who have believed internally showing with their testimony about their changed nature and external commitment to follow and obey God in church membership.
All of these views deny in some ways what I have argued here exegetically, doctrinally and confessionally as external-internal, administrative-substantive, and visible-invisible-Church distinctions.