When force is necessary, the United States has a moral and strategic interest in binding itself to certain rules of conduct, Obama said, and the United States must be the standard bearer, which is the reason why he outlawed torture and ordered that the detainee center in Guantanamo Bay be closed.
"I -- like any head of state -- reserve the right to act unilaterally if necessary to defend my nation. Nevertheless, I am convinced that adhering to standards strengthens those who do, and isolates -- and weakens -- those who don't," Obama said.
Obama spoke of ways for the United States to pursue ways to avoid war -- pushing human rights and economic opportunity for everyone, and underlining the need for the international community to engage in tough diplomacy to punish rogue nations such as Iran and North Korea that are pursuing nuclear weapons.
"In dealing with those nations that break rules and laws, I believe that we must develop alternatives to violence that are tough enough to change behavior -- for if we want a lasting peace, then the words of the international community must mean something," Obama said. "Those regimes that break the rules must be held accountable. Sanctions must exact a real price."
The president also made his most robust defense of his policy of engaging with adversaries.
"I know that engagement with repressive regimes lacks the satisfying purity of indignation," he said. "But I also know that sanctions without outreach -- and condemnation without discussion -- can carry forward a crippling status quo. No repressive regime can move down a new path unless it has the choice of an open door."
"In light of the Cultural Revolution's horrors," the president said, President Richard Nixon's meeting with Chinese Communist Party leader Mao Zedong "appeared inexcusable -- and yet it surely helped set China on a path where millions of its citizens have been lifted from poverty, and connected to open societies. Pope John Paul's engagement with Poland created space not just for the Catholic Church, but for labor leaders like Lech Walesa. Ronald Reagan's efforts on arms control and embrace of perestroika not only improved relations with the Soviet Union, but empowered dissidents throughout Eastern Europe."
Obama said engaging with hostile regimes is not simple but "we must try as best we can to balance isolation and engagement; pressure and incentives, so that human rights and dignity are advanced over time."
While the nonviolence preached by King and Gandhi may not always be possible, the president said, the love that they preached -- their faith in human progress -- must always be the North Star that guides the world on its journey.
"We can acknowledge that oppression will always be with us, and still strive for justice. We can admit the intractability of depravation, and still strive for dignity. We can understand that there will be war, and still strive for peace," Obama told the audience, which included stars such as Will Smith and Jada Pinkett Smith. "We can do that -- for that is the story of human progress; that is the hope of all the world; and at this moment of challenge, that must be our work here on Earth."
Obama is just the third sitting U.S. president to win the prestigious award, and the first to win it in his first year in office. The previous sitting U.S. presidents who won were Theodore Roosevelt in 1906 and Woodrow Wilson in 1919.