Answer
Baptism replaces circumcision as the covenant sign, but the issue in Acts 15 was not over circumcision as the covenant sign. Rather, it was over circumcision as a necessary means to salvation (Acts 15:1), and also as an introduction to life in the manner of Old Testament Judaism as a means of salvation (Acts 15:5).
Baptism is not a necessary step in salvation, as the false teachers in Acts 15 were claiming circumcision to be. Explaining that baptism replaced circumcision as the covenant sign would not have solved the problem, it just would have changed it: the false teachers then would have insisted that baptism was necessary for salvation, which would have been equally false, and that it was a necessary introduction to a life in compliance to Old Testament Judaism as a means of salvation, which also would have been equally false. Raising the issue of baptism would have complicated the issue without resolving any problems.
The heart of the matter was the question of salvation by faith rather than by works of the Law, so that was the issue that Peter addressed. Speaking of baptism as the new sign of the covenant would not have helped him make this point.
Answer by Ra McLaughlin
Ra McLaughlin is Vice President of Finance and Administration at Third Millennium Ministries.